Gifts of Life insurance Can Benefit MCG
Editors Note: Scott M. Fitzgerald, CFP®, partner and owner of Strategic Financial Management, LLC in Augusta, contributed to the information in this article.
In 2003, Americans gave almost $241 billion to charities, according to a study by Giving USA Foundation. This amounts to more than 2 percent of the gross domestic product, the nation’s economic output.*
As generous as individuals might be, most also want to ensure a financial legacy for their loved ones. Rather than choosing between giving to the Medical College of Georgia or leaving assets to loved ones, many people choose both with the help of life insurance.
Beneficiaries and owners
The simplest way to use life insurance to benefit MCG is to buy a policy
naming MCG the beneficiary or change your beneficiary on an existing policy to
MCG. This will not deplete assets you intend to bequeath to loved ones. If you
want to keep your assets or your spouse’s ability to draw on the policy’s cash
reserves intact, you might consider buying a survivorship life policy. Because
this type of life insurance offers a death benefit only upon the survivor’s
death, it can be more cost-efficient and ensure that a surviving spouse has some
access to cash value after the death of the spouse.
While these uses of life insurance don’t transfer ownership of the policy, doing so may help you net a charitable income tax deduction. The gift must be permanent and the former owner of the policy will not have access to any cash value in the policy. (Unpaid loans and withdrawals reduce the cash value and death benefit, and may change their tax treatment.) If you continue to pay premiums for the policy after transferring ownership, you may also be able to deduct these premiums for federal income tax purposes. This method gives MCG the flexibility to tap the policy’s cash value or cash in the policy when current income needs exceed future needs.
Life insurance in your estate
Buying a life insurance policy equal to the amount of other assets you give
to MCG, then naming loved ones as beneficiaries of the policy, can efficiently
help replace assets donated to MCG. Proceeds of the policy are generally free of
federal income taxes, although they may trigger federal estate taxes. You can
help mitigate life insurance’s effect on federal estate taxes by using an
irrevocable trust, one that is properly structured and administered, in
combination with life insurance. You can transfer ownership of a life insurance
policy to the trust, although if the insured dies within three years of
transfer, the benefits are still included in the estate. Or you might consider
giving cash to the trust, which would then buy a life insurance policy.
Giving to MCG can be rewarding without subtracting from assets intended for loved ones. However, before using any estate planning techniques to benefit MCG, please consult your estate planning attorney and/or a certified financial planning professional.
*Giving USA 2004, a publication of Giving USA Foundation, was researched and written by the Center on Philanthropy at Indiana University. Estimates based on original surveys of organizations and econometric studies using tax data, government estimates for economic indicators and information from other research institutions.
Remembering MCG in Your Will
If you plan to give to MCG through your will, please contact Tony Duva at 800-869-1113 or aduva@mcg.edu. |
Information in this article is not intended as legal advice. For legal advice,
please consult an attorney.
Tax laws are subject to change.