Charitable Giving

Legacy Building

During the month of August, we are focusing on charitable giving.  According to Forbes, the “Great Wealth Transfer” is on the horizon.  “Over the next two decades, parents and grandparents are expected to pass down trillions of dollars (approximately $84 trillion, by one estimate) to charities and younger generations—particularly, Millennials and Gen Xers.”  It’s expected that the future heirs will be actively engaged in charitable endeavors.  This is due to an awareness of social injustices, a desire to have more of an active role in impacting change, and a mistrust in the government’s ability to problem-solve.

It's not uncommon for estate planning to include a component of charitable giving.  Famously, some wealthy celebrities have been known to leave most of their fortunes to charity.  A recent example is Kirk Douglas, who reportedly donated the bulk of his $61 million fortune to charities through the Douglas Foundation, which he established with his wife in 1964.  Since Mr. Douglas’ children either pre-deceased him or made their own fortunes, they did not need to inherit anything from their father.  From the Douglas Foundation, his money was allocated to multiple charitable organizations in the interest of providing more equitable access to education, healthcare, and the arts. 

These posthumous contributions happen frequently for the affluent, whether they are unknown individuals or celebrities and they give openly or quietly.  Some make this positive impact simply to further a cause while others are enticed by the social clout; usually, the motivation is a little of both.  In any event, these donations can contribute to legacy building for the individual and name recognition after their death.

Enhancing a gift to charity can be done using life insurance.  As demonstrated in the graphic below, if an individual implements life insurance after establishing a history of contributing to a charity, they could end up donating more to the causes that are nearest and dearest to their heart.  Utilizing a short pay scenario (the 10-pay or 3-pay options in the graphic) can increase the rate of return even more.  This strategy is appealing to individuals who want to increase their contribution for a grand endeavor after they are gone, such as forming a scholarship or having a facility built in their name. 

When used as an asset class, life insurance is a good way to diversify a portfolio, since the death benefit is not dependent on the stock market or other outside determiners.  Since the average life expectancy for a man in the U.S. is age 76, life insurance can provide a higher rate of return at life expectancy than the average person could get through investments.

Contact us with any questions or opportunities to help you or your clients achieve identified goals.  This is what we enjoy doing for only a select number of families, businesses, and charitable institutions each year, and we look forward to hearing from you.