Exponential Power of Life Insurance
“What we spend we lose. What we keep will be left for others. What we give away will be ours forever.” – David McGee
Life insurance can be a powerful tool when used in a charitable planning context. There can be income and estate tax benefits to the owner as well as the potential for increased benefits for the charity. It can be used where other assets may not. It can provide unique leverage for accomplishing the wishes of the giver as well as the mission of the charity. However, planning considerations with life insurance can become complex due to issues based in tax, insurance and securities law.
Following are some of the advantages:
- Assuming premiums are paid, it provides a guaranteed death benefit. Gifts such as real estate or marketable securities are subject to wide fluctuations.
- The gift is cost efficient. If properly implemented, there is no depreciation to its value due to federal or state death taxes, state or federal income taxes, estate settlement costs or other fees.
- It avoids probate.
- Life insurance can provide a benefit many times the value of premiums paid. As compared to periodic contributions, life insurance is a completed gift.
- A larger gift can be given to the charity than by other methods.
- It enables the donor to give during their lifetime and use life insurance to replace the inheritance to family members. This allows the donor to receive the joy of giving during their lifetime and benefit the charity as they receive the gifts now rather than at some undetermined point in the future.
- Life insurance generally has a greater level of protection against creditors than other assets under most states creditor laws.
- The policy owner has the right to borrow or use policy values as collateral.
- Second-to-die policies are sometimes used in charitable planning because premiums are less when the death benefit is based upon two lives as opposed to one life. Also, underwriting can be more accommodating when two lives are involved.
- There are a number of creative ways life insurance can be utilized in giving strategies.
Contact Journey Beyond Self if you would like more information on
how life insurance can be used as part of your overall giving strategy.