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1) Donate an existing policy to MAF
If you already have a policy in existence, you
can make an absolute assignment of ownership of that policy to
MAF, which would then become the owner of the policy and would
be designated as the beneficiary of the policy.
A charitable donation receipt will be issued to
you for the cash surrender value of the policy at the time of
the transfer, and for each subsequent premium paid by you to
maintain the policy. As a result, the donation may provide a
significant tax benefit to you throughout your life.
2) Purchase a new policy and transfer ownership
to MAF
You may purchase a new policy on your life,
designate MAF as beneficiary of the policy, and transfer
ownership of the policy to MAF.
Annual premium payments
would then be made by you (sometimes for a limited number of
years) to ensure a
significant future gift to MAF.
You will receive annual income tax receipts for the payments you
make to maintain the premiums on this policy.
As a result, the
donation may provide a significant tax benefit to you throughout
your life.
3) Donate the proceeds
of a policy to MAF
You can retain ownership of a policy and designate
MAF to receive some or all of the insurance proceeds. This is the
simplest of the 3 options.
MAF would then receive the proceeds at the
time of your death. The donation may be claimed on your
taxes in the year of your death or the preceding year. The
maximum claim for donations in the year of death and the
preceding years is 100% of your income in each of those
years.
Life insurance
proceeds are not taxable, so the full
amount of the donation tax credit is available to offset taxes on
other income such as capital gains or RRSP income triggered upon
death.
Alternatively, you could make your estate the
beneficiary of the proceeds and add a bequest in your Will providing
an equivalent amount to MAF. The disadvantage of this alternative is
that the proceeds would be subject to probate fees.
While neither method yields any tax credit during your lifetime,
they both enable your estate to claim a credit on the final tax
return after your death.
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