Life insurance is an excellent tool for making charitable gifts for a number of reasons. Life insurance provides an "amplified" gift that enables you to purchase immortality on an installment plan. Through a relatively small annual cost (the premium), a benefit far in excess of what would otherwise be possible can be provided for charity. This sizeable gift can be made without impairing or diluting the control of a family business or other investments. Assets earmarked for family members can be kept intact.
For example, a 50-year old committed to giving $5,000 annually for 10 years could leverage the $50,000 gift into a $360,000 gift. A second-to-die, or survivor life policy, adds even more leverage. A 50-year old couple could make a gift of $800,000 with the same $5,000 annual commitment. (Assumes 50-year old(s), preferred non-smoker(s) using variable life policy earning 10% gross return.)
Keep in mind that using a traditional permanent life insurance contract will generally yield a 6% to 7% internal rate of return to life expectancy on premiums paid.
Life insurance can be a self-completing gift. For a donor committed to making annual gifts, a portion of the annual gift can be directed to an insurance policy guaranteeing the continuation of that gift in perpetuity. If the donor becomes disabled, the policy can remain in force through the "waiver of premium" feature (if elected). This guarantees the ultimate death benefit to the charity and, in some cases, the same cash values and dividend build-up that would have been earned had disability not occurred. Even if the donor dies after only a few premium payments, the charity is assured a full gift. The death proceeds can be received by the designated charity, free of federal income and estate taxes, probate, and administrative costs, and without any delay, fees, or transfer costs.
Large gifts to charity are less subject to attack by heirs because of the contractual nature of the life insurance policy. The death benefit is guaranteed as long as premiums are paid. This means that the charity will receive an amount that is fixed (or perhaps increasing) in value, and not subject to the potential downside of volatile market risks as in securities.
How to Give
Contact Suzan Huntington at 503.542.2304 or firstname.lastname@example.org to find a gift that best fits your situation.
* The information on this website is not intended as legal or tax advice. For such advice, please consult an attorney or tax advisor. Figures cited in examples are for hypothetical purposes only and are subject to change. References to estate and income taxes include federal taxes only. State income/estate taxes or state law may impact your results.