Building a Charitable Legacy with Life Insurance: Smart Strategies for Long-Term Impact

Many Americans make annual donations to charities they care about, often giving impulsively throughout the year. While these gifts are valuable, some donors wish they could do more or create a lasting impact that extends beyond their lifetime. One powerful way to achieve this is by carefully planning to leave a Charitable Legacy after death.

Creating a Charitable Legacy doesn’t always require gifting a substantial portion of your estate to charity, which can sometimes lead to family disagreements. Life insurance offers a cost-effective solution to balance supporting loved ones and contributing to charitable causes. Here are four strategic ways to use life insurance to build a long-lasting legacy through charitable giving.

1. Direct Gift of a Paid-Up Life Insurance Policy

As people age, the need for life insurance often decreases. If you have a paid-up life insurance policy with sufficient cash value to maintain its death benefit, you can donate the policy to Stablish Foundation in a Donor-Advised Fund (DAF).

By donating the policy, you receive a charitable tax deduction based on the policy’s cash value at the time of the gift. Upon your death, the life insurance proceeds are paid into the DAF, which is invested. Roughly 5% of the value is distributed annually to the charities of your choice, ensuring ongoing support to the causes you care about.

2. Allow Stablish Foundation to Purchase a Life Insurance Policy on Your Life

Another option is permitting Stablish Foundation to purchase a life insurance policy on your life. Each year, you make tax-deductible contributions to cover the premiums. After your death, the proceeds from the policy are directed into a DAF, allowing annual distributions to the charities you selected.

Life insurance often creates “financial leverage,” meaning the total value of the death benefit far exceeds the amount paid in premiums. This results in significantly higher charitable giving than a direct gift of cash or property would have provided over the same period.

3. Naming a DAF as the Beneficiary of Your Life Insurance Policy

For those looking for a simple approach, naming a DAF at Stablish Foundation as the beneficiary of your life insurance policy is an effective method. While this doesn’t offer current income tax deductions, it reduces the size of your taxable estate by the amount of the death benefit. It also ensures that your chosen charities receive ongoing support long after you’re gone.

4. Using Life Insurance to Replace the Value of an IRA Gift to a DAF

IRAs are often subject to significant income taxes when passed to beneficiaries. To avoid these tax burdens, you can name Stablish Foundation as the beneficiary of your IRA, which will allow you to create a Charitable Legacy through a DAF. At the same time, you can purchase a life insurance policy for your heirs, replacing the value of the IRA gift. Since life insurance proceeds are typically tax-free, your beneficiaries receive full value, and the IRA gift goes directly to charity without income tax implications.

Why Life Insurance is a Smart Legacy Tool

Using life insurance as part of your long-term charitable giving strategy offers several advantages. It allows you to:

• Create a larger impact than cash gifts alone.
• Provide financial security to both your family and your chosen charities.
• Benefit from tax deductions and estate tax reductions.
• Support the causes that matter to you for years to come.

Planning for Your Charitable Legacy

When incorporating life insurance into your charitable giving plans, it’s essential to work closely with trusted advisors, including attorneys, accountants, and financial planners. Stablish Foundation is here to collaborate with you and your professional team to ensure your Charitable Legacy aligns with your goals and values.

With thoughtful planning, life insurance can be a powerful tool to extend your generosity and make a lasting difference in the world. Reach out to Stablish Foundation to explore the best options for building your legacy.