Charitable Gifting

You have planned carefully to maximize financial return in your lifetime and beyond  for those who need you now and who may survive you. Including charitable giving in your estate plan not only fulfills your desire to be altruistic, it can also provide significant income, gift, and estate tax advantages.

Charitable giving is critical to the social and economic welfare of our country. Knowing this, the government gives you a choice. You can choose to be an involuntary philanthropist and support federal programs through the collection of taxes. Or you can choose to be a voluntary philanthropist and give to the charitable organizations that have special meaning in your life. If you choose to voluntarily give, the government allows you to benefit through tax savings.

Social capital is that part of your income and wealth that the government does not allow you to keep. Your social capital is the money you pay to the government in the form of income and estate taxes. The government, however, does give you a choice. Rather than paying income and estate taxes, you are given the option of making significant charitable contributions and using those deductions to offset your taxes.

Taxes or charitable gifts?
The decision is yours.

Life Insurance

Life insurance is a sensible and cost effective way to give a lasting gift to charity. By working with a charity to purchase a policy that names the charity as owner and beneficiary, you are able to contribute far more than might otherwise be possible. The organization receives the full benefit of the policy when you die. If it is a policy with cash values, the charity may even be able to access the policy’s cash values for current needs.

Gift of an Existing Policy

The donor may deduct the value of an existing life insurance policy as of the date of the transfer of the ownership to the charity (provided an absolute assignment is made). The value for income tax deduction purposes is the cost basis (premiums paid) in the insurance policy, or the fair market value if it is lower than the cost basis. Note that no deduction is ever allowed if the policy is subject to a debt no matter how small at the time the policy is transferred to the charity.

Once the charity owns and is the beneficiary of a life insurance policy, the donor may then deduct all future premiums paid to the charity to cover the premium obligations. The premium payments should be cash gifts contributed directly to the charity. This allows the donor to deduct the premiums up to 50% of AGI. If instead the donor pays the premium gifts directly to the insurance company, the gifts may be considered gifts for the use of the charity and, as such, limited to 30% of the taxpayer’s AGI.

Gift of a New Policy

Some states allow a charity to purchase life insurance on its donors. Other states do not allow a charity to purchase life insurance. The difference in state laws is due to the state’s definition of insurable interest. If your state does not permit the charity of your choice to purchase a life insurance policy on your life with funds you have gifted to the charity, you can purchase a new life insurance policy on your life and then gift the existing policy to the charity. The gift is equal to the premium paid, not the cash value of the policy.

Life Insurance Beneficiary

If a charitable organization is named as the beneficiary of a life insurance policy on your life, the death proceeds are paid to the charity at your death and your estate receives a charitable deduction.

Charitable Remainder Trust

A Charitable Remainder Trust is a special tax-exempt irrevocable trust that is drafted to comply with federal tax laws and regulations. The trust grantor can transfer cash or other appreciated assets to the trust and may receive income for life or, a certain term of years (not to exceed 20). This income can be paid over the grantor's life, plus their spouse's life and even their children's and grandchildren's lives.

Charitable planning requires serious decisions, with significant financial implications for you, and your charitable beneficiaries. That is why it is always a good idea to chose a financial consultant that exhibits commitment to their profession. The best choice is an advisor that has earned the professional designations Chartered Financial Consultant & Chartered Life Underwriter.

For a FREE initial consultation, call today: (800) 680-5596

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