Death, Taxes And The Search For Meaning

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    By: Mark Halpern

    Financial planners will tell you that you have three choices for where to leave your money after you’re gone – family, charity, or the Canada Revenue Agency in the form of taxes. With proper planning, you can choose the first two.

    Most of our assets are subject to a hefty tax bill when we pass. Fortunately, the Canadian government has created some of the best incentives in the world for us to use our charitable giving to moderate taxes. For example, people who will have a large tax bill on their estate could acquire a life insurance policy that will pay out twice the amount they owe in taxes. If they designate a charity as the beneficiary of their policy, the charitable tax receipt received can mitigate all the estate taxes owing, at a cost of pennies per dollar.

    ‘Never Spend Money’

    The thing is, it’s important to do this planning now, while the sun is shining and we’re all still here to enjoy it. You can use the money that you aren’t ever going to use (we call it ‘never spend money’) to purchase a tax-exempt life insurance policy to benefit your family and the causes you are passionate about.

    The gifts you plan can be some of the biggest you’ll ever be able to make too. Would you prefer to donate $5,000 a year in cash, or would it make more sense to use that amount to fund a $1 million life insurance policy with the charity as the beneficiary? The $1 million donation that will result from your policy would generate a $1 million charitable receipt, which would offset $500,000 of estate taxes.

    Planning a charitable bequest in your will is one of the easiest places to start when thinking about your estate and charitable giving. When I show clients that they can support themselves through retirement, leave enough to support their family, and make their mark on the causes they care about, the transformation is dramatic. People feel more organized and confidently charitable knowing that everything is looked after properly.

    Timely Opportunity

    Estate planning is a process, not an event, and provides a timely opportunity to transition from success to significance. The impact of your generosity can make a real difference to the charities you’re passionate about and the lives they touch. When you consider how difficult the pandemic has been on the most vulnerable in our communities, and how much the government has reduced funding to charities over the last four decades (the organizations who are taking care of those in need), the decision to name a charity in your will or the beneficiary of a life insurance policy is an easy one.

    Pandemic aside, the demand for the essential services provided by charities and non-profits has been increasing dramatically for several years. Imagine Canada projects that in the next 10 years the sector will need an additional $25 billion to meet spiking demand for services.

    A national campaign called ‘Will Power’ is actively working to show Canadians the power they have to fill this gap through gifts left to charities in their wills. Campaign organizers anticipate that if enough of us join the effort and leave a charitable gift in our will, we can raise as much as $40 billion in the next 10 years to support important social causes.

    Mark Halpern
    is CEO of WEALTHinsurance.com and is a Toronto, ON-based certified financial planner, trust and estate practitioner, and master financial advisor – philanthropy.