Barbara G. Wells, PharmD, FASHP, FCCP
CPNP Foundation President
Have you ever wished there was a way to leverage the value of your donations to the CPNP Foundation? Life insurance is one tool you may want to consider to help you accomplish your philanthropic goals.
These days, many individuals are looking beyond cash gifts to find other mechanisms to help them have an even larger impact on the foundations that they love and are committed to. One of these is life insurance. When structured properly, life insurance can provide several attractive benefits for you and for the foundations you choose to benefit.
Life insurance can allow you to make a much larger gift than you might otherwise be able to give, because relatively modest annual premiums mature into a substantial death benefit upon the donor’s death. Very importantly, giving life insurance also affords you certain tax benefits. If you give an existing permanent life insurance policy, you would receive an income tax deduction, and also may be able to deduct ongoing premiums you pay on your annual federal income tax return. As an example, for a donor in a 35 percent tax bracket, a $10,000 gift actually costs only $6,500 after factoring in the income tax charitable deduction.
Life insurance can also be used to replace assets for your heirs. When you make gifts to foundations and charities during your lifetime or through a bequest, a life insurance death benefit on your life can help offset the impact of those gifts and keep your family’s inheritance unchanged.
There are several ways to give to the CPNP Foundation using life insurance. Perhaps the simplest way is to name the CPNP Foundation as your policy beneficiary in whole or as a percentage. Using this method you will not qualify for an income tax deduction on premiums paid, but you will retain control over the policy, including access to any cash value, in case your financial situation should change such that you needed it for living expenses.
A second option is to donate an existing life insurance policy to the Foundation. In exchange for giving up control of the policy, you may be able to take a charitable income tax deduction. Then the policy would not be a part of your estate, unless you die within three years of the transfer, in which case, your estate would be eligible for an offsetting estate tax charitable deduction.
A third option is to use a life insurance policy in conjunction with a charitable remainder trust (CRT). Under this scenario, you would create the CRT and transfer assets to it for future use by the Foundation, earning you an income tax deduction based on the gift. You could receive income from the CRT and use that to purchase life insurance. The proceeds of the policy go to the designated beneficiaries when the policyholder dies, but the Foundation would keep the remainder of the assets already donated. As you can see, this option is a bit more complex.
In summary, if you are looking to leverage the value of your donations and create a legacy, life insurance can provide one mechanism to help accomplish your goals. By gifting a policy outright or by naming the Foundation as a beneficiary, you can provide the Foundation with a lasting legacy. Many variations and nuances of the above scenarios are possible. As always, the CPNP Foundation encourages you to seek appropriate, independent, professional advice and counsel about your gifts. Such a professional can advise you about tax liability, estate planning, and comprehensive investment planning.