Many of us have charitable objectives.  We would like to repay society for the blessings we’ve received and, at the same time, fulfill a desire to “give back” to those who have given us so much.  But many of us may feel somewhat frustrated—having the desire to make substantial gifts and yet feeling that our resources will not permit it. The common perception is that any meaningful charitable giving must be left to the wealthy. This is not necessarily so.

There is a method of giving that provides the opportunity to do far more for a charitable organization than you might think possible, even if your financial resources are limited.  The method is charitable giving using life insurance, and it is effective, simple to accomplish and beneficial to you as well as your designated charity.

To begin the process, you need only apply for the insurance policy and pay the premiums.  It is not necessary to set up a trust fund with its associated expenses, unless you want to do so.  The gift does not require constant attention as other types of investments may. There are a variety of ways to set-up a charitable gift using life insurance:

• You may give a gift that becomes self-completing.  Life insurance can provide for a self-completing gift in the event of your death or disability.
• You may give a bequest at death.  The proceeds of the policy will be paid to your charity free of any federal estate tax.  This will be true whether you own the policy or the charity owns the policy.
• You may continue to own the policy, and name your favorite organization as beneficiary.  If you are concerned that your family’s circumstances may change in the future, you may name the charity as “revocable” or “contingent” beneficiary and still retain flexibility and control.  The policy’s proceeds will be passed free of both gift and estate taxes.
• You may give an existing policy.  You may have several insurance policies, each purchased at different times in your life to satisfy a specific need at that time.  Some of those needs may no longer exist (e.g., home mortgage or children’s education). Your gift of that policy to charity allows you to take an income tax deduction for the amount of the policy’s fair market value (approximately the policy’s cash value) in the year you transfer the policy.  Any future premiums paid are also income tax deductible.
• You may give policy dividends.  Life insurance policy dividends received in cash can be donated to charity.  This is an easy, economical way to make charitable gifts and generate income tax savings.

Charitable giving using life insurance is both beneficial and a favored means of making charitable contributions for a number of reasons:

• The death benefit going to your favorite charity is guaranteed as long as premiums are paid.  This means that the charity will receive an amount which is fixed in value. (Guarantees are dependent upon the claims-paying ability of the insurance company
• Life insurance provides an amplified gift that can be purchased on the installment plan.  Through a relatively small annual cost (premium), a large benefit can be provided for your charity.  A large gift can be made without impairing or diluting the control of your family business interest or other investments.  Assets earmarked for your family can thus be kept intact.
• Life insurance is a self-completing gift.  If you become disabled, the policy can remain in full force through the waiver of premium rider.  Even if death occurs after only one premium payment, the charity is assured of its full gift. Additionally, the death proceeds can be received by your designated charity free of federal income and estate taxes, probate and administrative costs and delays, brokerage fees, or other transfer costs.
• Because of the contractual nature of a life insurance contract, a large gift to charity is not subject to attack by disgruntled heirs.  Life insurance proceeds also do not run afoul of the so-called mortmain statutes which prohibit or limit gifts made within a short time prior to death.
• A substantial gift may be made with no attending publicity.  Since the life insurance proceeds paid to charity can be arranged so that they will not be part of your probate estate, the proceeds can be paid confidentially.  Of course, publicity may be given if desired.

If you’ve ever wondered how you might “give something back”, or felt drawn to support a particular charity, one of the most affordable and beneficial ways, is through the use of life insurance.

 

[Representative Name] is a Registered Representative and Investment Advisor Representative of Equity Services, Inc. Securities and Investment advisory services are offered solely by Equity Services, Inc.  Member FINRA/SIPC. (supervisory office address and phone)

 

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This information is not intended as tax or legal advice.  The use of trusts involves complex tax rules and regulations.  Consider enlisting the counsel of an estate planning professional and your legal and tax advisors prior to implementing such sophisticated strategies.  The cost and availability of life insurance will depend on factors such as age, health, and the type and amount of insurance purchased.

 

The views and information herein have been prepared independently of the presenting Representative and are for informational purposes only.