Leveraging Your Legacy

Michael C. Crawford  -  Mar 23, 2017    

Insurance investments are fast becoming the most powerful vehicle for leveraging capital accumulation for charitable organizations. A person can contribute a major gift by re-deploying existing assets or plan a deferred gift using a highly leveraged insurance vehicle. By purchasing a permanent insurance policy with modest tax advantaged premiums, over a few years an individual can make a significant contribution. Many non-for-profits, that is, those entities defined as such under I.R.C. Sec 501 (c)(3) organization, employ this strategy as a means to support the growth and success of future endowments.

As government funding decreases, 501 ©(3) organizations must look to other sources to replace needed funds. Organizations with solid endowment programs are constantly looking for ways to develop new programs for the community they serve. Tax-exempt organizations set up endowments programs that provide funds for the future of an institution through a financial base from which only the earned income issued is used to support scholarship, building and other programs. Endowments provide a source of income that is stable, predictable and permanent.

Donors and charitable organizations work together to create a source of funds that are intended for current and future needs. These funds ensure an institution’s annual operating capabilities and provide funds to serve generations to come. Through using a life insurance policy as a form of giving, charitable organizations receive tremendous benefit, while the donors often receive favorable benefits.

This plan provides an individual with the most powerful vehicle available for making a generous gift to a non-for-profit organization. Through the creation of an insurance legacy is the creating of a policy with the organization as both the Owner and Beneficiary of the policy an individual can “leverage their legacy.” By making a gift now, a contribution can provide resources to support the mission of the organization.

For a $1,000,000 whole life insurance policy, a fifty-year-old male in excellent health would expect to make a premium donation of approximately $18k per year. The premium for a female under the same criteria would be about 12% less, or $16k per year.

Through investing in a whole life policy, the donor will be giving a gift of increasing and immediate accessible cash during his or her lifetime, while having the remainder payable to the charity upon their demise. For example, at the end of ten years, should the charity need funds, the anticipated cash available from the policy would be approximately $163,000 in the case where a male is the insured and $135,000 where the female is the insured. A new death benefit would then pass to the charity upon the insured passing.

In planned giving, the benefits to the organization are:

  • Replaces contributions of deceased donors that provide for a continuity of total contributions
  • Increases the capability of the donor to provide large amounts of funds after death
  • Provides capitalization of current cash values through the use of dividend accumulation with interest
  • Stabilizes the fund-raising activity for long term planning
  • Creates assets that enhance the credit stature of the organization

What are the advantages of an individual donating life insurance?

Maximized Gifting: In addition to current outright gifts, life insurance offers the opportunity to make a significant major gift.

Legacy Lives On: There is a tremendous satisfaction helping worthwhile causes and when you give the gift of life insurance, you are assured that your support lives on.

Personal Assets Remain Intact: There is no invasion of your capital when you purchase a life insurance policy. The only cost is the annual cost premium.

Benefits Given Promptly: A gift of life insurance is not subject to probate delays or estate settlement costs. In addition, life insurance claims are generally not subjected to the claims of creditors.

Premiums Are Tax-Deductible: A gift to purchase insurance owned by the charity and for the benefit of the charity is deductible as allowed by the IRS.

Charity Receives Your Gift And an Access Cash Value While You Are Alive: When a charity is made the owner of the policy, the policy builds cash value while you are alive. This cash value can provide funds to help the charity through emergent situations..

Privacy Is Protected: Since the gift of life insurance is a private matter, it can be kept confidential, without being exposed to the public or family members, if desired.

The process is straightforward. The donor purchases an insurance policy in the amount desired as a gift. The 501 (c)(3) is named as both the Owner and Beneficiary. The death benefit of a life insurance contract owned and payable to a charity is guaranteed, so long as the insurance is maintained in-force by the payment of premium. The donor pays the premium and claims the premium cost on their tax return as a charitable contribution (as permitted by the IRS). Once the total deferred gift is in place, these funds can be used at the discretion of the organization or as previously specified by the donor.

For a confidential discussion with Managing Director, Michael Crawford of Red Bank, NJ or Nationwide Wealth Management, LLC, call (888) 399-5169.

Michael C. Crawford, CFP® CLU® ChFC®

Michael Crawford of Red Bank NJ is the official founder of Nationwide Wealth Management, as well as a Group Facilitator at Tiger 21 and the Principal at Nationwide Valuations. He has tremendous expertise in Private Placement Life Insurance, high quality investments, insurance products for affluent clientele, and financial planning. Michael Crawford of Red Bank NJ specializes in investments, peer-learning-networks, high net worth, business appraisals, acquisitions, alternative investments, asset allocation, equities and much more.

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