I imagine that many of us have charitable interests which we would like to fund while at the same time balancing our charitable giving with assets that we wish to leave for heirs. I also imagine that we all wish to make our charitable gift giving create the greatest impact possible for the causes important to us.
Just as there are no “one size fits all” investment portfolios or estate plans, there are no “one size fits all” charitable giving strategies. If however, you wish to have a deep impact on and for a nonprofit and you care to leave assets to heirs, there are charitable giving ideas well suited for this objective. Imagine the following…
Susan wishes to leave $1 million to her alma mater and $1 million to the hospital that performed lifesaving surgery on her grandchild. One solution, a simple one, is to earmark and set aside $2 million to be transferred at her death to her selected institutions. The bottom line of this solution (for those of you keeping score at home and believe me, somebody will be), is Nonprofits – $2 million, Heirs – $0.
A more impactful, alternative solution is the “Return of Capital” charitable gift solution. Yes, it is possible to gift a sum of money, large or small, with the contractual agreement that a “return of capital” equal to the sum that established the gift, be returned to Susan’s heirs at her death. Consider the following…
Rather than earmark $2 million of cash or securities to Susan’s alma mater and the hospital, Susan funds only the amount needed to secure a life insurance policy providing a $2 million death benefit (satisfying her gift) in addition to an additional death benefit designated to heirs (the Return of Capital portion). Bottom line of this solution, nonprofits and heirs receive their expected/hoped for gift/inheritance, both accomplished through a plan costing Susan far less than $2 million.
Of course, where life insurance is involved, a donor’s health is evaluated to determine if the economics will support the financial leverage delivered by this strategy.
Also, though it is beyond the scope of this article, a variation of this idea often achieves equally favorable results for the donor and includes a current cash gift that every nonprofit wants, needs and will very likely, prefer.
We can all impact our community in meaningful ways with professional and proper guidance, consultation and thoughtful planning concepts consistent with one’s giving goals.
Engage your advisors, share your charitable giving goals and ask for ideas. You may very well be pleased with the possibilities and options to making large charitable gifts without having to write large checks and…without disinheriting your heirs.
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