Life Insurance: Cost-Effective Way To Generate Funds For Charities
It seems silly to spend 100 cents on the dollar to make charitable gifts when a more cost-effective vehicle is available. A lower-cost alternative would preserve assets for the family and retain the upside growth potential of the assets in question.
For example, if I propose to leave $500,000 to my favorite charity at my death, should I leave $500,000 of Krispy Kreme stock or $500,000 in cash that I generated for cents on the dollar? This alternative funding preserves the Krispy Kreme stockand all its future growthfor my family.
No doubt youve solved the riddle by now: Life insurance is a cost-effective way to generate “dollars at a discount” for your clients favorite charities. Its a simple, yet effective way to improve their estate plan.
For a given bequest of $500,000, life insurance is the most cost-effective vehicle to provide those funds. Conversely, for a given outlaysay $1,000 per yearlife insurance provides significant leverage to increase the funds that ultimately flow to the charity.
And since a single life policy is cost effective for this purpose, consider the enhanced leverage that a survivorship policy can provide. Survivorship also fits nicely when both spouses feel strongly about a particular charity.
Life insurance proceeds can provide a significant endowment to ones favorite charity. Such an endowment could help assure that the donors largesse is memorialized in the community for many years to follow.
Another possibility would be to gift unneeded policies to a charity. Many clients or prospects still have a small policy or two that their parents may have purchased for them when they were young. If these policies are no longer needed, it is possible to donate the policy to a charity and take an income tax deduction for the value of the policy.