Life Insurance

Life insurance can be an excellent planned giving tool for a donor who wishes to make a substantial gift to the WDMH Foundation to benefit the Winchester District Memorial Hospital. It is a way for moderate, tax-deductible payments to be made over time, resulting in a significant gift at the time of death. New or existing life insurance policies may be donated.


You can receive an income tax receipt for the annual premium payments by naming the WDMH Foundation as the owner and beneficiary of a life insurance policy.

 

The most attractive advantage to planning a gift of a life insurance policy is that it allows one to make a much larger gift to a charity than one might be able to out of their cash assets.

 

When using life insurance for charitable gifting, it is important to consider different strategies and the different tax benefits. Below are three ways in which to make a planned gift of a life insurance policy to the WDMH Foundation:

  • Designate the WDMH Foundation as the beneficiary of a life insurance policy
    • The most straightforward approach is to buy a life insurance policy where you are the owner of the policy and you designate the charity as the beneficiary.
  • Name your estate as the beneficiary
    • This scenario is similar to the first scenario in that you are the owner of the policy. However, instead of naming the charity as the beneficiary, you name your estate as beneficiary and simply leave instructions in your will that the proceeds of the life insurance policy will be paid to your choice of charities.
  • Transfer ownership of the policy to the WDMH Foundation
    • In this scenario, if a life insurance policy is set up so that the WDMH Foundation is the owner of the life insurance policy, the premiums for the policy will qualify for a tax credit during your life. However, since you are no longer the owner of the policy, the future death benefit will not qualify for a tax credit (you receive the tax benefit during life, not after you pass).

 

Which solution is best for you

Every situation is different and you should consult your professional advisors. The two most crucial issues are control and when you want the tax credits.

  • Control: With scenario 1 or 2, you maintain control, as you remain the owner of the policy. As the owner, you can change beneficiaries whenever you want. In scenario 3, you relinquish your control when you make the charity the owner of the policy.
  • Tax: It is important to determine when you want to utilize the tax credits. If you want to have tax credits every year while you are alive, you will need to take a hard look at scenario 3. You give up the control but you get to use the premiums in paying less tax every year. However, if you have a significant amount of accrued tax liabilities in the estate, you may be better off saving the tax credits for the future by using scenario 1 or 2.

Wealth replacement life insurance giving

There is one more way to utilize life insurance in your planned giving strategy. We all have assets and wealth that we may have originally intended to bequeath to children or other beneficiaries. However, did you know that there is a way that you can ensure that those heirs still receive the value of those assets both immediately upon your passing, AND without the assets’ values going through probate?

 

Wealth replacement life insurance refers to the premise of purchasing a life insurance policy to replace the value of whichever asset you’d like to donate to charity during your lifetime. Then, when you pass, your heirs will receive the life insurance benefit of the same value (life insurance benefits don’t go through probate, so they’re received by the beneficiary immediately and aren’t taxed as income in your estate – so, doubly beneficial).

 

Questions? Contact the Foundation's Managing Director, Kristen Casselman today at 613-774-2422 ext. 6169.

 

Read our Life Insurance giving fact sheet.

 

Disclaimer: The above information is not intended as legal or financial planning advice. When considering any estate gift, or planned gift you should always consult your legal advisor, financial planner, your family, and the WDMH Foundation, if possible.