Congratulations on joining an elite group of people who dedicate a portion of their success to helping others. Philanthropy is the backbone of humanity and takes many shapes & sizes.
At Quotes Parade, we are proud to be a part of philanthropic planning. For those who are sure that they want to give back but may not know how they want to give back, we have assembled this guide to some of the most popular methods of charitable gifting our clients engage in.
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Most Common Philanthropic Uses of Life Insurance
- Make a cash donation
Provide a cash infusion to help meet a budgetary objective or strategic goal.
- Provide a research endowment
Dedicated to funding a research project so you may continue to support a cause indefinitely.
- Create a scholarship fund
Allow your legacy to continue by helping the next generation of artists, athletes, and academics realize their potential.
- Purchase a gift
Provide supplies or update facilities so an organization may more efficiently meet its goals.
- Gift your valuables collection
Assure that the recipient does not have an uncovered tax burden against the value of your donated items.
- Commission a work of art
Erect a monument, commission a mural, or obtain an item at auction to be a memorial to your legacy.
- Fund a construction project
Provide the means for erecting a new facility to help a charity or educational institution.
- Absolve debt
Eliminate worry related to student loans, a mortgage, or other promissory note.
- Establish a foundation
Unsure how you would like to leave your legacy? Fund a family foundation and charter it to continue doing good in as many ways as possible!
How Can Life Insurance Enhance Your Charitable Gifting Strategy?
What are the biggest advantages of life insurance as a vehicle for philanthropic planning? Life insurance provides a secure way to sustain and grow money plus provides the income on a tax-free basis to the recipient.
How Complicated is Life Insurance Backed Philanthropy?
Developing a philanthropic gifting strategy with life insurance is quite simple; select your limit of coverage, decide on the beneficiary, engage in medical underwriting, pay the premium. However, we certainly recommend including your financial and estate planning advisors in the conversation. Sometimes, creating an irrevocable life insurance trust (ILIT) or other entity to hold the policy and/or pay the premiums can have significant tax advantages.
How Much Coverage Do I Need?
This question can only be answered with an understanding of your charitable intentions and a vision for the funding. You can contact Quotes Parade for a preliminary conversation and we will be happy to assist in your planning. We do not charge a fee for our consultative service.
How Much Will This Cost?
Certainly the amount of coverage, your age, and overall health will all contribute to the cost of coverage. In most instances the premium can be paid annually or over a specified term. Many times, the tax benefits are on par with return on investment. At Quotes Parade, we assist you and your legal & finance teams with assuring the coverage and premium will meet your goals.
I Know I Need Significant Coverage. How Does That Affect Cost?
For policies in excess of $5,000,000 we typically recommend considering a fully-funded strategy. The fully-funded strategy includes many benefits such as:
- Drawing down a taxable estate
- Reducing total out of pocket expense
- Potentially higher rate of return
Another thing to consider if taking on a high-value policy for philanthropic planning is premium finance.
Under a premium finance arrangement, a 3rd party satisfies your premium payments and you incur a finance charge. With many premium finance arrangements coming in around 2-3% interest and the internal rate of return for most high-valued, fully-funded policies breaking 6% during life expectancy, this can be a savvy way to make a big splash.
Who Needs to Be Notified of My Gifting Strategy?
Aside from your family and planning team, you should always work with the institution who will be receiving the gift to assure they understand the intent. In addition, if an institution is unprepared to receive a gift it could actually do more harm than good. Most large organizations have a team dedicated to managing the logistics of large gifts.
If your goal is to set up a family foundation or an endowment managed outside of the organization which will benefit, it is wise to plan how the money will be distributed in your absence. When ready, be sure to disclose your intentions to the stakeholders managing the funds so they may prepare.
What Else Should I Know?
Anytime you are discussing your legacy plans the conversation can be difficult. With charitable gifting, be sure your heirs understand both the gift and the reason behind. Engage in open dialogue throughout the planning process and allow your family to provide feedback.
The objective is to have them be as excited to give this gift as you are. Do not let them feel slighted, angry, or confused by finding out about a gift as it is being disbursed.
Overall, philanthropy is one of the most indelible marks you can make with your legacy. Be diligent and sure with your planning but most of all: have fun and be proud.
Quotes Parade is an independent insurance brokerage dedicated to planning for life’s most complex challenges. With bespoke solutions for life, long term care, disability, and other special risks needs, our focus is on the human element of tough conversations. Contact us and see how we Put The Life Back Into Life Insurance.