Life Insurance As A Charitable Giving Tool Is More Attractive than ...

by CustomerService@sbmedia.com (VERNON W. HOLLEMAN, III)

Charities love planned gifts. And today they are looking for good planned giving stories to tell.  Help them by exciting your clients about the power of giving life insurance.  After many exotic and hyped investments failed or proved fraudulent, demonstrating the tax-free growth and returns of life insurance, a known commodity, is cool again.    In a recent example of this strategy, my firm helped a 55-year-old man create a gift using life insurance because making a current cash gift was not an option.  We suggested he determine his insurability in a preliminary underwriting test. After collecting medical records, the underwriter at our chosen carrier deemed him to be in “preferred” health. Result: He could accomplish his goal of a $1 million policy with his budget.  After full underwriting, it turned out he was “super preferred”--all the better.  This created a roughly $9,500 annual premium for the policy.  He examined several funding alternatives, including “pay forever” and abbreviated scenarios, and determined the pay forever was the best bet because it provided the best return on his investment.  He also wanted the policy to last until age 100 with cash value in the contract, but he did not want to fund the policy to have it endow (wherein the cash value equals the death benefit at age 100).  The internal rate of return (IRR) of the contract if the donor lives to be 100 will be no less than 7%, a handsome long-term net return.  Both the donor and the school were pleased—the proverbial win-win.  Insurable interest is the first planning aspect that must be confirmed.  In my example, the donor had not only graduated from the school; he had two children who had gone there and served on the school’s board. Most importantly, he had a long track record of giving, both annually and during campaigns. The Truth is, the school would suffer a financial...

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