A Charitable Gift and Insured Life Annuity will allow you to make a major gift now to CARF, increase your retirement income and preserve your capital for your heirs. This strategy involves three components; (1) a gift to your charity, (2) a prescribed life annuity, and (3) a life insurance policy. Compared to traditional interest-bearing investments, such as GICs and T-bills, this approach can significantly increase your after-tax income and guarantee it for life!

Mike and Anita Donor are both 65 years old and in good health. They would like to make a major gift to CARF but are concerned about the reduction in income from their GICs (which forms part of their overall portfolio) if they do so. Currently they have $300,000 in GICs averaging a 3.90% return which yields them $6,270 per year of after tax income1. If they were to make a $50,000 gift now, their after tax income would be reduced by $1,045 per year to $5,225.

By combining a charitable gift, the acquisition of a joint life annuity and a joint insurance policy, Mike and Anita can fulfill both their philanthropic and income goals.
  1. Knowing that Mike and Anita would qualify for an insurance plan, they can make a gift of $50,000 to CARF. This will give them an immediate tax savings of $23,205.*
  2. They will acquire a joint life annuity with the remaining $250,000 which will provide a lifetime guaranteed income and to replace the capital in their estate to their heirs, they have acquired a $300,000 joint insurance policy.
  3. The Charitable Gift and Insured Life Annuity will provide Mike and Anita with an annual after tax income of $10365 which is $4,095 more income than they were receiving from the GICs with no charitable gift.
  4. Because of their level of income, Mike and Anita are being clawed back on their Old Age Security. By following this strategy, Mike and Anita will be able to recoup some of their clawed-back income.
  5. At the second death of Mike and Anita, the annuity will stop and the insurance proceeds of $300,000 will be paid tax-free to their heirs.

If Mike and Anita wish, they can name CARF as a full or partial beneficiary of the life insurance policy. Because Mike and Anita remain as the owner of the insurance plan, their estate will receive a tax receipt for the amount gifted. This will offset any tax owing by their estate.

* Assuming a marginal tax rate of 46.41%