Converting Your Existing Insurance Policy

Twenty years ago, Salvatore and Sylvia were starting a family and bought a permanent insurance policy to cover long-term needs like debt and provide income while their kids were young, or if either spouse passed away.  Fast forward 19 years and Salvatore and Sylvia had to decide to keep the 20-year term insurance and reapply to get better rates or convert their coverage to a new and long-term permanent policy. They weren’t interested in additional permanent insurance for themselves, and instead decided to leave a legacy using this policy.

They chose to leave a legacy gift to the CHEO Foundation to support patients and families who rely on CHEO, the CHEO Research Institute and Roger Neilson House. They appointed the CHEO Foundation as the owner and beneficiary on a new “last to die” policy so a significant payout would go to CHEO after they both die. Salvatore and Sylvia chose a guaranteed 15-year payment product that would not only be paid up in 15 years but would also have an increasing death benefit and cash value.

Clients can receive a significant fair market value when they transfer the policy. They can also claim charitable tax credits and donation receipts for premiums paid in the future. You should consult your tax advisor if you’re considering transferring the ownership of a policy to a charity since there are issues to consider. Salvatore and Sylvia’s overwhelming generosity really stood out to me. Many people aren’t aware of the power of gifting a tax-free asset like life insurance, it’s an underused safe asset class, especially by people who have the means to do it. It was wonderful and gratifying for me to see how one small act of kindness can make such a difference in other people’s lives.

 

BY MARK MAZUREK, BA, CLU, CHFC, CHS FINANCIAL PLANNER MAZUREK FINANCIAL SERVICES LTD.  *Names have been changed

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