How can you leave a legacy for less? Here is one way of making a major charitable contribution, even if you are not wealthy.
To learn how much you can afford to give each year, try the free and powerful analytical tool designed to determine your yearly donation capability: the TriDelta Donation Planner.
As an example, let’s say you are 50 and in decent health (assuming a 35 year life expectancy). You are able donate $1,000 a year to your favourite charity.
Here is what you could do:
| Donation Amount | $1,000 a year |
| Cost | $550 per year, after tax credits
or $19,250 over 35 year period |
| Effective rate of return on this “investment” | 10% (after tax credits) |
| Total Gift possible to your favourite charity | $162,000 |
Shouldn’t it be a total of $35,000? Where does the $162,000 amount come from?
The $162,000 gift comes from a life insurance contract, with the charity as the beneficiary and owner of the policy. Each year, the premiums on the life insurance is about $1,000 in total, so instead of giving directly to the charity, you keep the insurance. The payout on this insurance is $162,000 upon death. If you had $10,000 a year premiums, you could afford to give almost $2-million.
The only drawback is that the charity will not receive your donation until the end of the 35 year period.
Make it a gift to a parent and benefit a charity sooner
If you wish to give sooner and witness the benefits, you can use the same strategy (with the same charity as the beneficiary), but take out the life insurance on one of your parents.
For example, a 50 year old may have a 72 year old mother in decent health. The charity would most likely benefit sooner, you would be able to witness the donation, and this can also be a gift to a parent who feels close to their house of worship or particular charity.
Here is an example where you put in $2,000 a year into a plan for your 72-year old mother if she survives to the age of 87:
| Donation Amount | $2,000 a year |
| Cost | $1,100 per year, after tax credits
or $16,500 over 15 year period |
| Effective rate of return on this “investment” | 12.7% (after tax credits) |
| Total Gift possible to your favourite charity | $49,000 |
If you are interesting in leaving a legacy or making a large charitable contribution, do not assume your wealth does not permit it.
To get inspired, learn more about Leaving a Legacy and Donation Planning in Canada.
