Using Life Settlements To Achieve Charitable Giving Goals
As their trusted advisor, your clients rely on you for innovative insurance, financial and estate planning options, including assisting them realize their charitable giving objectives. The life settlement is a powerful new tool that allows you to help your clients maximize the full potential of their life insurance policies.
A life settlement is the sale of an existing life insurance policy for a lump sum of cash that is less than the policys face amount but more than the cash surrender value. A life insurance policy is property, like a car, house, stocks and bonds that can be legally sold in accordance with applicable laws.
Through a life settlement, a policy owner can realize value today from an asset that is generally thought to only have a benefit when the insured passes away.
How can a life settlement be used in your clients charitable gifting program? There are many variations and complex estate and tax planning strategies that can be employed when utilizing life settlements in a charitable gifting program. However, in its simplest terms, the owner of a life insurance policy can either sell the policy and give the proceeds of the life settlement to the charity or give the policy directly to the charitable organization that, in turn, immediately sells the policy for a lump sum of cash through a life settlement.
The income tax ramifications associated with each transaction are different. A tax professional should be consulted as to the most appropriate strategy for the clients specific situation.
Do any of your clients own a life insurance policy that meets the following criteria? The policy:
–Insures a person over age 65 or who has a serious illness?
–Has a face value of at least $100,000?
–Is at least two years old?
–Provides insurance coverage that is no longer needed or wanted?
If so, then the policy may be eligible for a life settlement.
Consider the following example as one way in which a life settlement might be used to help your clients maximize the potential of their life insurance.