There are several ways you can use life insurance as the basis
for a charitable gift.
Making the Charity a Beneficiary of your Life Insurance
Policy You may wish to make the charity the beneficiary (or a contingent
beneficiary) of a life insurance policy as a way to make a sizeable
future gift. You retain lifetime ownership of the policy, keeping
the right to cash it in, borrow against it, and change the beneficiary.
A gift of this nature is treated much like a bequest made through
your will. Because you retain the ownership of your asset (the
policy), you will not receive an income tax charitable deduction
for this future gift or for your premium payments during your
lifetime. The policy's proceeds will be included in your gross
estate, and your estate can take an estate tax charitable deduction.
Insuring a Gift to McLeod Health
Carroll and Nancy Player firmly believe in McLeod Regional
Medical Center's mission to provide excellent regional
medical care to the residents of northeastern South Carolina,
and they act on their belief through valuable ongoing
volunteer and financial support. Carroll has served on
the McLeod Health Foundation Board almost since its inception
20 years ago. A respected local dentist well known for
his community service, he says serving on the Foundation
Board has been a great learning experience for him.
"It
has given me good insight into the high quality of patient
care and efficiency at McLeod," Carroll says.
Nancy, also a dedicated McLeod volunteer, previously
chaired the Children's Miracle Network Celebration and
continues to raise funds for the McLeod Children's Hospital.
The Players raised a son and daughter who both became
medical professionals, and today they enjoy four grandchildren.
Their son, Dr. Keith Player, is a practicing general surgeon
at McLeod. Their daughter and son-in-law are both practicing
occupational therapists in Georgia, who while still in
their 30s have set up a foundation to help children in
need receive therapy. "Our children learned the value
of philanthropy by example, and we're very proud to have
planted that seed of giving in them," Nancy says.
Carroll says they chose to make a planned gift through
the Foundation because of their strong feelings about
supporting McLeod. Their financial planner, Wendell Jones,
and tax attorney, Michael Roberts, helped them select
and designate a gift of life insurance. "We had a life
insurance policy that is more than we need now, so we're
using it to benefit McLeod after our lifetimes," he says.
"It was a simple avenue for making a gift, and we are
happy to have the opportunity. We think McLeod's future
is very bright."
"When you feel blessed, you want to give back," Nancy
adds.
To join the Players in
providing for McLeod's future, contact Roxanna Tinsley
at (843) 777-2694 or rtinsley@mcleodhealth.org.
Making a Gift of Your Policy You may wish to transfer ownership of a policy to the charity,
or purchase a new policy with the charity as owner and beneficiary.
If you make a charity the owner and beneficiary of a policy,
you are entitled to certain tax advantages.
Example: Since their children had grown up and begun lives on their
own, the Walkers decided to review their finances. They realized
that some of the insurance they carried while the children were
dependent on them was now not really needed. They decided to donate
a fully paid-up policy to charity. Their financial advisor told
them that as the policy is paid-up, they are entitled to a charitable
deduction equal to the lessor of the premiums they paid over the
life of the policy or the cost of a comparable replacement policy
if purchased today.
The Walker children were very supportive of the idea. In fact,
one of their children purchased a small whole life policy and
designated the charity as the owner and irrevocable beneficiary.
As a result, the annual premiums that are paid are a charitable
deduction.
Wealth Replacement Using Life Insurance A donor may make a current gift to charity and receive a
charitable tax deduction. At the same time, the donor may purchase
life insurance to replace the donated amount or perhaps, the
amount after estate tax that the beneficiaries would have received.
Depending on the circumstances, the charitable tax savings and
any life income resulting from the gift may defray the cost
of the wealth replacement insurance premiums.
Example: John Abbott, age 60, wants to make a gift that will ultimately
be used to purchase equipment for a charity he has supported
for years, but he is also concerned for his children and their
futures. He creates a 6 percent Charitable Remainder Unitrust
for $100,000, which yields a tax savings to him of $13,307.
He then purchases a $100,000 whole life insurance policy that
will maintain his children's inheritance. His annual premium
payments are $4,500, which he pays for the first three years
from his tax savings and subsequently with the increased income
from his trust.
Creating a Life Insurance Trust
You may want to set up an Irrevocable Life Insurance Trust (ILIT).
An ILIT removes the life insurance from your estate to help reduce
estate tax while providing other benefits. For example, upon one's
death, the proceeds of the life insurance policy may remain in
the trust to provide income for the surviving spouse, but stays
outside of the spouse's estate for estate tax purposes. Or, the
trust could be used to distribute proceeds to children of a previous
marriage. Although ILITs can be expensive and more complicated
than owning life insurance directly, they may be an attractive
option in certain situations.
As with all matters concerning estate planning, please consult
your estate and tax specialists. Click here
to return to Wills and Bequests.
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Please note, individual financial circumstances will vary. The information on this site does not constitute legal or tax advice. Donor stories and photographs are for purposes of illustration only. As with all tax and estate planning, please consult your attorney or estate specialist. You may also contact a member of the Professional Advisory Council. All material is copyrighted and is for viewing purposes only. Use of this site signifies your agreement with the terms of use. The content in this Planned Giving section has been developed for McLeod Health Foundation by Future Focus. Please report any problems to webmaster. Revised: January 31, 2008 9:44.
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"It
has given me good insight into the high quality of patient
care and efficiency at McLeod," Carroll says.