Retirement Benefits & Life Insurance
As a result of the February 2000 Federal Budget, the process of naming Conestoga as a beneficiary of your registered retirement savings plan (RRSP) or registered retirement income fund (RRIF) on your death has been simplified.
The charitable donations tax credit has been extended to include the proceeds from RRSPs and RRIFs where Conestoga is designated as beneficiary. Prior to the budget proposals, if you wanted to make Conestoga a beneficiary of one of these plans, you were required to name your estate as beneficiary of the proceeds and make a gift to Conestoga in your Will in order to qualify for the tax credit. Now you can name Conestoga as the direct beneficiary of your RRSP or RRIF. While your estate remains responsible for satisfying the income tax liabilities arising on your death (which will be offset by a tax credit described below), the proceeds may flow directly to Conestoga, potentially protecting the gift from the claims of creditors, other estate beneficiaries, probate and other estate costs.
Advantages of Gifts of Retirement Benefits
- Allows you to make a substantial gift in the future without diminishing your assets today. In other words, it costs nothing now, yet it may give you a great deal of satisfaction to know that your gift will live on.
- Your estate will receive a valuable tax credit for your final tax return. The credit can be applied to up to 100 per cent of your net income in the year of death and the preceding year. This credit can save your estate a considerable amount of tax particularly if you have large holdings of appreciated listed securities and mutual funds. Working with your financial advisors, we can help you maximize the tax benefits from your gift planning.
- As is the case with a gift through your Will, you have the flexibility to change the beneficiary at any time, as circumstances dictate.
- If the proceeds from your retirement funds are $12,500 or more, you may create a named, endowed fund that will support Conestoga forever.
Naming a charitable organization, such as Conestoga, as beneficiary of your retirement plans would result in a charitable donation tax credit that would offset taxes owed and, since the funds would not pass through your estate, they would not be subject to probate and other estate costs.
Creating a Permanent Legacy
Through a gift of $12,500 or more, you can create a named endowed fund that will provide valuable ongoing financial support in an area that is of interest to you at Conestoga. Scholarship, research and equipment funds are just a few examples of areas that could benefit from your support. In addition, you may direct your gift to a particular school or program.
How do I designate Conestoga as beneficiary on my RRSP or RRIF?
It’s easy! All you have to do is go to your financial institution and make a request to change the beneficiary on your plan. They will provide you with a form to complete and the change is then made. A visit to your lawyer is not required, although we do suggest that you consult with your lawyer and/or other professional financial advisors prior to making any changes to your estate plans.
We also suggest that you contact a member of Conestoga’s Development Office to discuss your intentions. It is important for us to verify how you would like the eventual proceeds from your retirement fund put to use. It is also important for us to know whether you wish to be recognized for your contribution or prefer to remain anonymous. Please feel confident that any request for anonymity will be strictly honoured.
If you have questions or would like more specific information on gifts of retirement benefits and/or named endowed funds, please contact the Development Office.
Giving a life insurance policy is one way to maximize your contribution to Conestoga. It enables you to make a significant, lasting gift to Conestoga with minimal outlay of current savings or income. A gift of life insurance is a deferred gift, which means the proceeds from a gift commitment made now will be realized by Conestoga sometime in the future. Donors often struggle between their desires to achieve philanthropic goals and their need to preserve their estates for their families. A gift of life insurance can eliminate this conflict.
Advantages of Gifts of Life Insurance
- A gift of life insurance allows you to make a larger donation to Conestoga 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 Conestoga 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 Conestoga is both the owner and the beneficiary of a policy, the donor receives immediate tax savings. In these instances, the gift is irrevocable which means it cannot be changed.
Some Options for you to consider:
You can purchase a new policy.
If you name Conestoga 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 Conestoga 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 Conestoga as the irrevocable owner and beneficiary, you will receive a tax receipt for the net cash surrender value (less any outstanding policy loans) and any subsequent premiums paid. This policy can be sort of a hidden asset, available to be used now for your philanthropic purposes.
You can make Conestoga the beneficiary of a new or existing policy.
As amended in the 2000 Federal Budget, 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 per cent of your 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 Conestoga.
Since you will not be able to change the ownership, you would make Conestoga the beneficiary of the policy. As above, a donations tax credit will be available when the death benefit proceeds from the policy are paid directly to Conestoga.
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 Conestoga, you receive a tax receipt for the amount you donated, or 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 that your wishes are honoured, you should consult your life insurance agent and any other pertinent advisors.
At the same time, you should also contact Conestoga’s Development Office 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 school, program or research area of your choice, or you can direct it where it is needed most. It is also important for us to know whether you wish to be recognized for your contribution or prefer to remain anonymous. Please feel confident that any request for anonymity will be strictly observed.
Please contact us for more information about a gift of Life Insurance to Conestoga.