This is a guest post by Evan author of My Journey to Millions. Evan is an attorney, and works as a Director of Financial Planning overseeing the firm’s high net worth gift and estate planning.
Bob recently wrote a phenomenal post about his strategy to give millions to his Church. The post, was well written, well thought out and provided sound advice with Biblical backings. Basically Bob used the article to explain his goal to give away millions over the course of his life by following these steps:
- Give
- Pay off Debt
- Start a Business
- Defy Parkinson’s Law
- Pay off House ASAP
- Invest Wisely
- Give
Bob’s advice is great way to provide for your Church over your lifetime. What if your income only allows you to give a $50 month and it doesn’t look like that is increasing any time soon? What if you die? Will your Widow be able to provide the same amount of stewardship? What about your Children, have they seen your sacrifice and love for God?
There are many charitable gifting techniques with varying degrees of complications, but you may be able to provide a relatively large sum of money to your Church utilizing life insurance for leverage. I will start with the two easiest examples, and then if there is an interest I can get a bit more advanced.
Charitable Gifting Using Life Insurance
You pass away, and your family gets to see your Church being provided for in a relatively large way; they get to see how much the church meant to you. Additionally, your Church gets a lump sum that it might not be normally used it, heck, maybe you’ll get a plaque up there.
Church as Beneficiary of a Life Insurance Policy
This is the simplest way to provide a large lump sum to your Church. In this situation you stay in control during life, so if you change Churches, you move or you decide that this is nor longer your testamentary intent you can then change the beneficiary on the policy.
This option does not provide an income tax deduction, but does provide an estate tax deduction upon your death.
Church as Owner of a Life Insurance Policy
New Policy
When the Church is owner and beneficiary of a life insurance policy, the premium payor (YOU) may receive an income tax deduction. This option is a little less flexible because you can’t just change the beneficiary, but you could just stop paying the premium.
Old Policy
You donate items that you don’t want on a normal basis, why not a life insurance policy? The policy could be paid up, it could be a permanent or term policy (with time left on it), again you will receive an income tax deduction. The amount of that deduction is determined by what kind of policy and the specifics about that policy.
Advanced Charitable Gifting
There are also a few common Trust Options. Where a Trust is the recipient and owner of the life insurance policy and then you (obviously before you die) decides the rules to that the trust. The two most common forms of these trusts are:
- Charitable Remainder Annuity/Uni Trust –> Commonly referred to as
a CRUT or CRAT. In this type of charitable trust the box (i.e. the trust)
will pay out your family/heris/Evan/whomever for x amount of dollars for y
amount of years, and the remainder will go to the Church - Charitable Lead Annuity/Uni Trust –> Commonly referred to as a
CLUT or a CLAT. In this type of charitable trust the box (i.e. the trust)
will pay out your charity/church x amount of dollars for y amount of years,
and the remainder will go to your heirs or whomever you choose.
{ 5 comments… read them below or add one }
Helping yourself first (by paying off your debt) is the best strategy in my mind for giving consistently. If you make this a priority, you can have yourself in a position of prosperity and increase your giving relatively soon. Debt free gives you amazing options.
Thanks for the post!
Evan, nice post on various giving options. If I remember correctly these methods also remove the proceeds from being included in your estate.
In the second example of donating an old policy to the church, does the three-year rule of surviving the transfer by three years before the proceeds are excluded from your estate still apply?
hi Evan,
It is a very positive investment; investing in God’s house. Donating is something we all need to practice. For me, i think first of stabilizing my financial situation before thinking of other bodies.
Thanks for this opportunity Bob! I hope this helps out a few Churches.
If the policy is owned by the charitable organization then the proceeds won’t be included in your estate because you don’t have the ability to direct the beneficiary.
If you own the policy and direct the proceeds to a Church or charitable organization then the proceeds we’ll be in your estate but you’ll receive an estate tax deduction.
This is an interesting article. I had heard a pastor mention something about buying a life insurance policy and making the church the beneficiary.
I am a regular giver, but recently married with a young son now. Giving has stretched our budget a little tighter. I plan on leaving something to the church when I pass, but I am not sure how to structure that yet.
This seems like a good idea to consider.
Thanks