Doug BeVille, Protective Life Insurance of Chattanooga, presented three ideas to be considered in giving to charities: Leverage, planning and giving to loved ones and charities without taxation.
He said the biggest fear in giving is how it will impact the donor’s budget, the charity’s budget and how to manage the money to ensure the donor’s visions are met.
He presented three ways to support nonprofit interests without impacting personal budgets.
The first, leverage, is simply buying insurance. He gave the example of a man who bought a $1.5 million life insurance policy to leave for his family in the event of his death. The man paid $111 a month for three months before he died suddenly of a heart attack.
He said most people carry policies longer than three months, but the leverage provided by life insurance is incredible. If set up properly, insurance premiums can be tax deductible donations to churches or other charities.
Life insurance is about planning, he said. “We don’t sell life insurance anymore, we talk about what it can do.”
BeVille told of an 83-year-old woman who owned a building valued at $600,000. She had a church she loved, but the woman also had four children.
She gave the building to the church and received a tax deduction over six years for the value of the building. A charitable annuity pays her an income, which was the reason she owned the building. The income was used to buy a $600,000 life insurance policy.
“The church got an asset. She got a tax deduction. She’s still getting the same income she was getting, which she doesn’t need. She’s going to use that to buy a guaranteed, tax-free asset for the kids,” he said.
“When she dies, instead of inheriting a building, the four children are going to inherit the money.”
That would not be the right thing to do for someone who needed the income.
In discussing the third scenario, BeVille said there are three places to leave money when someone dies and those are to loved ones, charity and the government.
The third option was about giving through IRAs when the Required Minimum Distribution is activated. At 70.5 years of age, it is required that an individual draw down on their IRA. Even with the RMD, the IRA will continue to grow until age 85. He said it is possible, through insurance, to leave a donation to a nonprofit organization and leave a tax-free inheritance for the children.