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Planned Giving Committee
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Life Insurance
Charitable
Uses of Life Insurance
Many of our members support USPS from their current income. Although they may wish to give more, only a few may be able to afford such gifts. Life insurance, however, enables a person of modest means to raise his/her contribution to a significant level without affecting savings or slighting other personal responsibilities.
Gifts of Paid-up Policies. Like many things which are purchased, life insurance policies can become obsolete. The original purpose for the insurance may no longer exist or the coverage is being offered more economically through a group policy. In such instances, it may make good sense to assign the policy to USPS. The donor is credited with a charitable deduction equal to the replacement value of the policy.
Gifts of Policies with Premiums Due. In such situations donors to USPS have a choice: an existing policy may be assigned to USPS, or a new policy may be purchased and all ownership rights be assigned to USPS. The premium payments should be sent to USPS Headquarters with a note that it is your wish the policy be kept in force. When it is feasible, payments may be made with appreciated securities instead of cash. Since USPS as a charity pays no capital gains tax upon the sale of securities, this is an excellent tax-wise way of lowering the actual cost of the gift.
Gifts of Partial Interests. Many of our members, who support USPS and other charities, may feel that they can not afford to give as much as they might like during their lifetime. That is why "tithing their insurance estate" is an idea which appeals to them. Naming USPS as a "primary beneficiary of a partial interest" in your insurance policies is one very easy way of accomplishing several personal objectives, including your charitable intentions. It is easier to do than add a codicil to a will, and costs nothing, which makes it an attractive way to make a planned gift.
Gifts of Contingent Interests. In many instances this may be the only way a donor should make such a gift, because of family obligations. USPS may be named as a "contingent" beneficiary, depending upon certain events happening or not happening. For example, if certain members of the immediate family are not living at the time of the donor's death, USPS will receive all or a portion of the insurance proceeds.
Gifts Which Do Double Duty. An innovative way of having life insurance care for a family member and still pass through to USPS is to use the proceeds to fund a life income plan.
For example, both Mr. and Mrs. Smith have paid-up life insurance policies of $100,000. Each designates that the death proceeds of their respective policies be used to fund a charitable remainder trust for the surviving spouse. If Mr. Smith dies when his wife is 75, the trust will pay her an annuity (at least $5,000/year) for the rest of her life. The remainder interest will pass to USPS after her lifetime.
Using life insurance to make a major planned gift to USPS may be the only way in which some donors should make such a gift. While donors of all ages may use life insurance as charitable gifts, it may be especially appealing to donors who have not as yet accumulated capital assets but do have sufficient income to support their favorite charities.
However, because USPS depends on members to endow the support of our current operating programs, we encourage you to make creative gifts of life insurance in addition to any annual dues.
Perhaps one of the most unique aspects of using life insurance to fund a major gift is that appreciated securities can be used to pay the premiums. However, the securities must first be given to USPS, then sold and the proceeds used to make the payments.
For example, Mr. Donor has taken out a policy on his life but has given all rights under the policy to USPS. The annual premiums are $1,000 for seven years. Instead of paying the premiums directly to the insurance company or giving USPS a check for the premium amount, he instructs his stock broker to transfer to USPS a little over $1,000 (to cover commissions) of the most highly appreciated stock in his portfolio. USPS sells the stock in our account so we can pay the premiums.
The result is a major planned gift at the lowest possible cost to Mr. Donor.
Life insurance is an asset found in most people's estates and is purchased primarily to cushion the economic loss of the family upon the insured's death or to supply the liquidity needs of the estate.
Life insurance can also be used to fulfill another purpose, namely to make a major gift to USPS. Because of its flexibility - a gift that starts out small but ends up BIG - charitably inclined people are looking at their existing policies or taking out new policies as ways in which they can make a significant gift to USPS so that the boating education programs of USPS will continue.
There are several ways in which our members can make a gift through the use of life insurance. For example, donors can solve the dilemma of wanting to make gifts to their natural heirs and to USPS by coordinating a charitable remainder trust with a life insurance policy.
Here's how it works: Mr. and Mrs. Brown fund a charitable remainder unitrust with growth stock, naming themselves as beneficiaries and USPS as the charitable remainderman. They use the tax savings generated by the gift as a down payment on a joint-life, last-to-die insurance policy and give the policy to their children. The increased income from the unitrust can be used to pay premiums until dividends are sufficient to make the payments.
In essence, they have replaced the stock with life insurance, taken it out of their estate so as to avoid estate tax, and made a significant gift to USPS.
Safe boating has been a tradition of USPS since 1913, based on the USPS triangle of fraternal boating club, self education and civic service. USPS has grown since then to an organization of over 55,000 members of 446 squadrons.
Boating classes are taught by the squadrons to benefit the boating public throughout the United States, as well as Tokyo, Puerto Rico and the U.S. Virgin Islands. Members of USPS can also avail themselves of advanced grade and elective courses.
You can help make the USPS tradition live on through creative gift planning. United States Power Squadrons is qualified under section 501 (c)3 of the Internal Revenue Code. Therefore, your contribution qualifies for federal income tax and federal estate tax deduction as a charitable contribution, subject to certain limitations.
A printer friendly file (pdf format)
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You
should consult your attorney about the applicability to your
own situation of the legal principles contained herein.
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For further information on the uses of Life
Insurance in creative gift planning,
contact any of the committee members listed below.
United States Power
Squadrons
Planned Giving Committee
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Committee Members:
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R/C
Chester G. White, Jr., JN (Chairman) |
