Life insurance makes charitable gifts grow

Since the reduction of tax-sheltered vehicles and the increase of personal income tax brackets, charitable giving has become more attractive, particularly in the deferred-giving form made possible with life insurance, or charitable trusts. However, there are some caveats of which the financial plann...

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Bibliographic Details
Published in:Best's review (Life-health insurance ed.) 1995-01, Vol.95 (9), p.78
Main Authors: Culley, David A, Brink, Michael
Format: Article
Language:English
Subjects:
Asset acquisitions
Beneficiaries
Capital gains
Charitable remainder trusts
Charities
Cost control
Donations
Estate planning
Estate taxes
Financial planning
Gifts
Income taxes
Inheritances
Insurance agents & brokers
Insurance policies
Life insurance
Market segments
Personal selling
Remainder interests
Retirement planning
Tax basis
Tax benefits
Tax deductions
Tax deferred privileges
Trusts
Wealth
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Summary:Since the reduction of tax-sheltered vehicles and the increase of personal income tax brackets, charitable giving has become more attractive, particularly in the deferred-giving form made possible with life insurance, or charitable trusts. However, there are some caveats of which the financial planner should be aware. For example, while income tax savings were enhanced by the 1993 increase to 36%, or even 39.6%, for taxable income over $250,000, the Internal Revenue Code limits deductions to 50% of the donor's adjusted gross income for gifts made to public institutions. Perhaps the most significant increase in charitable giving has been through the charitable remainder trust combined with the wealth replacement trust funded by insurance. These vehicles can create quadruple-win scenario for donors. There will be an increased and possibly tax-sheltered cash flow during a donor's life. A donor may be able to avoid capital gains and estate taxes and make a significant gift to a favorite charity while replacing assets gifted to heirs.
ISSN:0005-9706