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Advantages of Gifts of Life Insurance

A gift of life insurance allows you to make a larger donation to TRU than you would have thought you could afford, at relatively little cost

It does not reduce the value of your estate for your heirs

Life insurance proceeds are paid directly to the TRU Foundation and are not subject to probate and other estate fees

Life insurance can provide an annual tax credit or a tax credit in the year of death. How you structure your gift will depend on where you have the greatest need for tax relief. For example:

  • You can opt to retain ownership of the life insurance policy and thus the flexibility to change the beneficiary over time as circumstances may require. If you choose this option, your estate will receive the tax credit when the gift is realized.
  • When TRU is both the owner and the beneficiary of the policy, the donor received immediate tax savings. In these instances, the gift is irrevocable which means it cannot be changed.

Some Options

You can purchase a new policy.

If you name the TRU Foundation as the irrevocable owner and beneficiary, you will receive an income tax receipt yearly for the full amount of the premiums paid. With increasing longevity, older persons can now purchase insurance at more affordable rates than were possible in the past. Retired individuals who have some annual discretionary income can support TRU without depleting their financial reserves or reducing the projected inheritances of family members. Greater leverage is possible when two donors, usually wife and husband, purchase a joint policy. These policies are available even if one spouse is not insurable and are generally more economical than a policy only on the insurable spouse.

You can donate an existing policy.

If you donate an existing policy that you no longer need, and name TRU as the irrevocable owner and beneficiary, you will receive a tax receipt for the next cash surrender value (less any outstanding policy loans) and any subsequent premiums paid. This policy can be used sort of as a hidden asset, available to be used now for your philanthropic purposes.

You can make TRU the beneficiary of a new or existing policy.

A charitable donation tax credit will be available when a donor designates that the death benefit proceeds of his/her policy are paid directly to a charity. Your estate will receive a tax credit for the proceeds of the policy when the gift is realized. This tax credit can be applied to up to 100% of the net income in the year of death and the year prior.

You may have a life insurance policy from your employer or former employer that you want to donate to TRU.

Since you will not be able to change the ownership, you would make TRU the beneficiary of the policy. As above, a donation tax credit will be available when the death benefit proceeds from the policy are paid directly to TRU.

You may want to consider wealth replacement insurance

If making a large charitable donation is important to you, wealth replacement insurance is not complicated and it could allow you to make a large charitable gift now without affecting the legacy you want to leave to your children.

When you make your donation to the University, you receive a tax receipt for the amount you donated, of the Fair Market Value if you donated other assets, such as securities, art, or real estate. The next step is to purchase a life insurance policy from an insurance company, with a face value equal to the amount you donated. You name your heirs as beneficiaries, and they receive the tax-free proceeds from the policy upon your death in lieu of the donation you made to charity. The tax-free proceeds are paid to your heirs in cash. If an asset such as artwork was left to your heirs and had appreciated in value, it may have to be sold to pay capital gains tax. In the end, it could diminish what your heirs receive. Depending on your age and health, you might be able to pay off the policy premiums with the tax savings resulting from your charitable gift.

Creating your Legacy with a Gift of Life Insurance

To ensure that your particular needs are met and your wishes are honoured, you should consult your life insurance agent and any other pertinent advisors. At the same time, you should also contact us at the Foundation Office at TRU to let us know about your intentions. Not only can we assist you in making sure things move along smoothly, we also need to discuss how you would like the eventual proceeds from your insurance policy put to use. You may, for example, want to create a permanent endowment fund in your name, or in the name of a loved one, and direct the income to a faculty, department, or research area of your choice, or you can direct it where it is needed most. It is important for us to know whether you wish to be recognized for your contribution or prefer to remain anonymous. Please feel confident that any requests for anonymity will be strictly honoured.

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