Goal: Make a large gift with little
cost to you
Benefit: Current and possibly future income
There are several ways you can
use life insurance as the basis for a charitable gift.
the charity a beneficiary of your Life Insurance Policy
You may wish
to make Saint Joseph's College 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
a gift of your policy
You may wish to transfer ownership of a policy
to Saint Joseph's College, or purchase a new policy with Saint Joseph's College
as owner and beneficiary. If you make a Saint Joseph's the owner and beneficiary
of a policy, you are entitled to certain tax advantages.
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
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.
using life insurance
A donor may make a current gift to Saint Joseph's
College 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.
John Abbott, age 68, 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.
Return to the Legacy Giving home page or to Legacy Giving Options.
For more information or a confidential discussion of your charitable options, please email or call the Vice President and Chief Advancement Officer, Joanne Bean, at 207-893-7891.
Please note, individual financial circumstances
will vary. The information on this site does not constitute legal or tax advice, either in whole or in part. Donor stories and photographs are for purposes of illustration
only. As with all tax and estate planning, please consult your attorney
or estate specialist. All material is copyrighted and is for viewing purposes
only. Use of this site signifies your agreement with the terms
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