Have you set aside money in your Will to go to your favourite charities?

Even if you're still just thinking about it that's fantastic!  But if you could guarantee that your charities receive a much larger gift using this same money – and remove potential headaches for your executors – would you consider doing that instead?

Giving through your Will – a public document that all can see – can present challenges that you might not have thought of. 

For example, is there any chance that any of your beneficiaries may resent your charitable gifts because they feel that they deserve a bigger inheritance – especially if they have acted as your caregiver? It’s quite common that scenarios like this result in beneficiaries contesting philanthropic gifts made through a Will. 

Such challenges can result in significant delays in settling your estate. This adds significant legal costs that reduce the size of the estate for all of your beneficiaries, including your charities. This can decrease the size of charitable tax receipts that you may be counting on to reduce estate taxes in order to leave more to all your beneficiaries.

Also, the anger and disagreements that often surround contested Wills often permanently fractures families.

Here are three simple and cost-free ways that ensure your charitable wishes remain intact.

1. Give to your favourite charities while you are alive.  Time-honoured estate planning strategies often involve reducing the potential size of your estate. If you can afford to give now, your estate will be smaller so will its taxes, fees and many potential headaches for your executor.

2. Or if you are less than 80 years old, it’s often wise to use money you’ve set aside for your charities to buy a life insurance policy, naming your charities as its beneficiaries.

Life insurance allows anyone, even people of modest means, to give more.  In many cases, if you have normal health issues such as high blood pressure or cholesterol and they are effectively managed with medication, you are likely eligible to buy life insurance.  Finding out if you are insurable is actually a simple process.

When you choose a life insurance policy that grows in value over time you’ll get four important benefits without spending any more money:

i) You can withdraw the growing cash value inside your policy anytime, just in case you need money sometime down the road.

ii) The size of your charitable gifts increases over time so your charities can have a bigger impact on the causes close to your heart.

iii) Tax receipts to your estate also increase in value, helping to offset your potential estate income and capital gains taxes.

iv) Growth in the value of life insurance policies is tax-free so you’ll give more, without spending more.

Because life insurance policies are private, and usually can’t be contested*, you won’t lose control over your charitable intentions. Even better, because your death benefit will go to your charitable beneficiaries outside of your Will, your charities will get your gifts much faster and with very little effort on the part of your executor.

3. If you don’t qualify for life insurance, consider transferring your intended gifts into investments with an insurance company.  Such investments – including money market funds, GICs, segregated funds (the mutual funds of the insurance world) and annuities of any kind – are not considered part of your estate, which also makes your executor’s job easier. All your charities will receive the proceeds privately, quickly and unreduced by estate fees and probate taxes.

Now isn’t that something worth thinking about?

Note: To learn more about whether life insurance estate strategies are the right fit for your circumstances, you must consult with a licensed insurance professional. When using insurance strategies to multiply your generosity to charities, it’s ideal to consult an advisor who is well versed in maximizing the power of your charitable giving, while also reducing potential taxes and other challenges that your estate might incur.

Jack Bergmans, CFP

Best-selling author of
Ripple Effect: Growing your business through insurance and philanthropy  &
Multiplying Generosity: Creatively using insurance to increase legacy gifts

* Some exceptions