Life insurance provides a special way to make charity work. Small monthly payments can generate a very large legacy at death. Plus, the tax authorities allow the donor to obtain a tax credit for the premium payment! So, people who may think they could never provide that special benefit to a needy charity can easily meet their goal.

Annuities can be established to both provide a tax-free income to the donor and an immediate benefit to the charity. Charitable annuities are a very viable form of donation for some persons with capital they need for income who have a desire to provide for a charity.

In some cases, where estates are large and tax problems loom, charitable planning can be used to alleviate or even eliminate the tax bill. New rules about the amount of donation that can be made by a donor in the year of their death provide significant benefits.

Let's say a person has a $1,000,000 tax problem at death. They could insure to pay the tax and the government would get the money. Or they could arrange that a sufficient amount is donated, at their death, to charity to provide a tax credit of $1,000,000.

This may require a $2,000,000 Life Policy rather than the $1,000,000 needed to pay the tax but in this case rather than having the federal government collect $1,000,000 tax, a charity, who desperately needs the money will obtain a sizable bequest. In fact, it can be arranged so that the life policy is donated to a private charitable foundation founded by the taxpayer and the family can designate where the charitable funds are to go long after the taxpayer has died. This allows a level of control through the foundation that is missing in direct donations to charity.

Charitable Gift Planning is an expanding and challenging field and we are here to help you work with your clients to make these ideas work for them.