We've all heard the saying by Benjamin Franklin: "In this world nothing can be said to be certain except death and taxes." This quote is as true today as it was in Franklin's day when he first penned it in a letter.
While a touch on the morbid side, the good news is life insurance can help minimize the financial impact of both these certainties.
(Term) Life and death
Term life insurance provides affordable protection for your short or long-term goals, with the flexibility to renew, convert, or modify the amount of your insurance to meet your future needs.
Compare low cost term life insurance to see how affordable term life insurance really is.
Typically, life insurance is purchased to:
- Pay off any final expenses or personal debts like credit cards, car loans or a mortgage
- Offset the loss of a provider's income for those who rely on that person's financial support
- Contribute to the future education of children and grandchildren
But how can life insurance help offset the taxes you or your estate will have to pay?
Your estate and taxes
In Canada, taxes must be paid on the assets of a person's estate that have appreciated in value when it is passed onto someone other than a spouse.
So for example, if at your death your intent is for your children to enjoy the family home, cottage, RRSPs, stocks, art, or jewelry, and these items have increased in value since they were originally purchased, your children will have to pay taxes on the gain in value.
The money from a life insurance policy can be used to ensure that as much of your estate as possible is passed on to your beneficiaries. Instead of having to cash in or sell any of your assets to pay the taxes, they can use your life insurance money to cover any taxes on the assets they inherit.
Even better, the insurance money your beneficiaries receive as a result of your life insurance policy is not subject to income tax. It's tax-free!
Term life insurance, your favourite charity and tax benefits
You may wish to leave money to your favourite charity. If so, you've got a couple options that offer tax benefits-some now or some later.
If you're looking for an immediate annual perk now, you can purchase a life insurance policy making the charity of your choice both the policyholder and beneficiary. Since you've committed to paying the premiums for the duration of the life insurance policy, you receive a tax receipt every year for the amount you pay annually in premiums. Keep in mind however that although you are paying the premiums, you are not the owner of the policy. This means you have promised to make annual donations to this charity for the life of the policy.
This may sound like a big commitment, but when you consider how affordable life insurance is, it's a great way to donate to your favourite charity.
- A 35 year-old non-smoking male can get a 10-year term $100,000 policy for as little as $127 per year (February, 2011). For 10 years, you'll pay the premium of $129 and get a tax receipt from your charity.
- A 35 year-old non-smoking female can get a 10-year term $100,000 policy for as little as $108 per year (February, 2011). For 10 years, you'll pay $108 annually and get a tax receipt from your charity.
Another option is to donate the proceeds of your life insurance policy. In this case, you are the policyholder and your charity of choice is the beneficiary. While you won't realize any immediate tax benefits-you will not get a tax receipt for the premiums you pay each year-you will get a tax receipt, for use on your terminal tax return, for the donation of your insurance money the year you die.
Find out more
Every person is unique, and so are their financial needs. At Kanetix, quotes for Term 10, Term 20, Term 30 or Term to 100 life insurance policies with policy face values ranging from $50,000 to $2 million can be obtained fitting virtually everyone's needs. Easily compare instant online life insurance quotes today, and apply online or call for coverage.
Or if you prefer to speak to someone first, we can introduce you to an affiliated licensed insurance representative who can discuss life insurance options and offer guidance for you and your loved ones regarding any potential tax benefits. There is no sales pressure or obligation to buy.
Call us at 1-888-854-2503