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Double Duty: A Gift to Charity and to Family

Posted February 2017

If you are like most people, deciding what to do with your assets is one of the most important decisions you face. Few of us feel like we have enough resources to meet all of our goals. Wouldn’t it be nice if some of our resources could do double duty?

Some of our friends have found a creative way to do just that. Through careful and creative planning they have been able to make a generous gift to us without diminishing the amount they pass on to their family members. The plan is remarkably simple; here’s how it works:

Example: Peter and Paula, both 62, are longtime supporters of ours and for years have had a dream of creating an endowment in their names. But they have been concerned about how such a gift would affect what they have available to pass on to their children.

They recently spoke with us about gift-planning strategies and then decided to fulfill their dream by transferring $250,000 worth of stock to us to create the endowment. In their 35% tax bracket, the gift saved Peter and Paula $87,500 in taxes, which they used to purchase enough life insurance to replace the value of the stock they contributed—and they named their children as the beneficiaries. The policy will pay the children $250,000 (the value of the stock used to fund the endowment) when both of their parents are gone.

This particular asset-replacement plan utilizes what is known as second-to-die life insurance. Since the policy pays only when both of the insured persons have passed away, the premiums are typically much lower than they would be for a policy on the life of either person individually. An asset-replacement plan can also be created using individual policies. A second-to-die policy simply increases the ability of donors to leverage their tax savings into life insurance proceeds to replace the value of assets they give to charity.

Of course, the cost of any life insurance policy is directly related to the age and health of the proposed insured. The younger and healthier the insured, the higher the face value generated by the premium payments.

If you would like to learn more about asset-replacement planning or other creative gift strategies, please contact us. We welcome the opportunity to assist you.

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