LIFE
‘Tis The Season For Charitable Giving Via Life Insurance Life insurance is a great way to maximize the dollars that will ultimately go to charity. By Barbara Rozgonyi
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ife insurance is a viable legacygiving solution for clients who want to provide funds to a worthy cause. But more than half of consumers don’t see life insurance as a vehicle for charitable giving. In a recent study by Lincoln Financial Group, 15% of consumers see life insurance as one of the best vehicles for charitable giving while 33% view it as one possible, but not the best, vehicle. Fiftytwo percent don’t see life insurance as a means for charitable giving at all. With more than 10 million nonprofit organizations in the world, according to the 2018 Global NGO Technology Report, there’s no shortage of causes to support. Charitable giving is always in season. Whether it’s school kids selling wrapping paper, clubs selling grapefruit, your alma mater’s annual fundraising campaign or even a Kickstarter campaign to fund a startup’s project, there are thousands of ways to give in the moment. But what about leaving a large legacy gift that impacts a charity, and the world, in a bigger way? That’s where you come in.
Charitable Giving In The U.S.
According to The Giving Institute, giving by individuals declined in 2018. At $427.71 billion, individual giving comprised less than 70% of overall giving for the first time in at least 50 years. Giving to foundations decreased the most, after experiencing strong double-digit growth in the prior year. Giving to international affairs showed the largest growth of any sector at 9.6%. Giving by bequest amounted to $39.71 billion.
How Does Life Insurance Fit In?
Options for charitable giving may include 44
Life Insurance Can Grow A Charitable Gift There are a number of ways life insurance can help clients leave a legacy to their favorite cause.
Charitable giving riders on life insurance Gifting a life insurance policy Name a charity as beneficiary Gifting policy dividends life insurance, annuities and retirement account assets. There are many advantages to leaving a charitable gift through life insurance. It is simple to set up and often does not require the services of an estate attorney. The size of the gift is set and is not affected by market fluctuations or economic factors. Using a life insurance policy to benefit a charity allows the giver’s wishes to be carried out by directing a large gift to a specific charity or charities while preserving assets for the giver’s family members. Life insurance also is a way to multiply the dollars that will eventually go to the giver’s choice of charity. The proceeds from the life insurance policy are larger than the amount of money that the giver spent to fund the premiums, enabling the giver to provide a bigger gift than they might have been able to make directly from their own funds. Simply put, small premiums fund large gifts. If the charity is the owner of the policy, the premiums may be tax deductible. As with most tax issues, the guidelines may
InsuranceNewsNet Magazine » December 2019
Source: Investopedia
be complicated, so consulting with an accountant is advised. There are several options for using life insurance as a charitable giving vehicle. Your client can name the charity as the beneficiary of an existing life insurance policy. Or your client can contribute an obsolete or paid-up policy that the charity can cash in now. If your client purchases a new policy and gifts the premiums to the charity, your client may be able to claim a charitable deduction for income tax purposes. In addition, your client may choose to take dividends received from an existing policy and direct them to the charity.
How To Choose A Charity
Causes to consider include art, animals, fighting diseases, faith-based, children, education, environmental, parks, health, international relief, mental health, police and fire, veterans, social causes or youth development. A donor may choose to fund scholarships, nonprofit grants or even start a foundation to follow their vision. Along with a list of best and worst charities by giving category, Consumer Reports offers these tips: Verify