Charitable Giving

Using Life Insurance for Immediate Benefits

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.

While most life insurance policies are implemented or donated to charity for the ultimate death benefit, there are several ways that a charity can access the funds inside a permanent life insurance policy during the donor’s lifetime.

If the donor gifts an existing policy to charity, the charity becomes the policy owner and the beneficiary.  If the donor is over the age of 70 and has had some health struggles, the charity might be able to complete a life settlement and receive a lump sum for the policy.  This can only be done with the donor’s knowledge and cooperation, so all parties would have to agree on this approach to benefit the charity.

If the donor is a young, healthy individual who gifts an existing policy to charity, the charity becomes the policy owner to make policy decisions.  The charity can make systematic withdrawals or loans from the policy’s cash value.  This approach decreases the ultimate death benefit that is received and may result in additional charges inside the policy for loan interest.  However, the charity would receive the funds sooner.  Alternatively, the charity could surrender the policy for the available cash value and receive a lump sum to be used immediately.

Lastly, whole life policies that are implemented or donated to charity have an option to receive annual dividends from the insurance carrier.  These dividends can be paid to the charity as policy owner.  However, they are not a guaranteed provision of the policy and dependent on the insurance carrier’s profits and performance.

These approaches allow the donor to see the fruits of their donation and can be a win for both the donor and the charity.  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.