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Life insurance and charitable giving: why and how to plan your legacy
September 29, 2021

September is Life Insurance Awareness month. If the ongoing COVID-19 pandemic has taught us anything, it’s to plan ahead and prepare as much as possible for the "worst case scenarios.” No, you probably don’t need an endless supply of toilet paper, but it is important to consider your family’s financial circumstances and how to ensure economic stability for them in the future.

Amalgamated Investment Services offers access to a wide range of insurance solutions and support with financial planning for the unexpected. Life insurance is one way to protect your loved ones financially after you die, and your income stops.

There are many personal and financial scenarios to think about in which having life insurance would provide peace of mind and support to those who depend on you. For example, some circumstances to consider are if you are married and your spouse depends on your income, or you have children, an aging parent, or a disabled relative who depends on you for support, or your retirement savings and pension won’t be enough for your spouse to live on, or you have a substantial joint financial obligation for which another person would be legally responsible after your death. In all these cases, the proceeds from a life insurance policy can help your loved ones continue to manage financially during the difficult weeks, months, and years after your death.

If you're still unsure about whether you should buy life insurance, a good question to ask yourself is: If I died today with no life insurance, would my family need to make significant sacrifices and give up the lifestyle to which they've become accustomed in order to meet their financial obligations? Would they be able to make car payments, pay the mortgage, or afford college tuition? These can be difficult questions to ask yourself, but important to consider for your family’s financial future, nonetheless.

Life insurance can also be an excellent tool for charitable giving in pursuit of your philanthropic goals. Not only does life insurance allow you to make a substantial gift to charity at relatively little cost to you, and further a cause you believe in, but you may also benefit from tax rules that apply to gifts of life insurance.

Life insurance allows you to make a much larger gift to charity than you might otherwise be able to afford. Although the cost to you (your premiums) is relatively small, the amount the charity will receive (the death benefit) can be quite substantial. Since life insurance proceeds paid to a charity are not subject to income and estate taxes, probate costs, and other expenses, the charity can count on receiving 100 percent of your gift. This will allow you to make a significant impact supporting charitable causes or initiatives that are most important to you.

Charitable giving is a core component of raising funds to find medical solutions for diseases or improve access to healthcare, to improve the quality of educational facilities and resources, to fund sustainable projects that could help protect the environment in the years to come, and to advance any other social, medical, or environmental issue you may be passionate about. Your final contributions to a cause that you believe in could make the biggest societal impact. One person alone may not be able to change the world, but we could all plan to leave the world a little better than the way we found it.

Giving life insurance to charity also has certain income tax benefits. Depending on how you structure your gift, you may be able to take an income tax deduction equal to your basis in the policy or its fair market value (FMV), and you may be able to deduct the premiums you pay for the policy on your annual income tax return. When an insurance contract is transferred to a charity, the donor's income tax charitable deduction is based on the lesser of FMV or adjusted cost basis. Many charitable planning techniques offer tax benefits, and combined with life insurance, can further benefit both your heirs and your favorite charities. (We do not provide tax advice. Please consult your tax advisor.)

Having a plan is key to ensuring your financial goals are met.  Once you have decided on a life insurance and legacy plan that works for you and your family’s needs, be sure to periodically review your coverage and make updates as new life events unfold. Circumstances may have changed and now more or less coverage is appropriate. There may be new products that provide the same benefits at a cheaper cost or provide benefits that were not available when you originally purchased the policy.  As always, we are here to assist you with either your new insurance needs or an insurance review that can explore your options.

For more information, speak to our Infinex representatives.

 


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Investment and insurance products and services are offered through INFINEX INVESTMENTS, INC. Member FINRA/SIPC. Amalgamated Investment Services is a trade name of Amalgamated Bank. Infinex and Amalgamated Bank are not affiliated. Products and services made available through Infinex are not insured by the FDIC or any other agency of the United States and are not deposits or obligations of nor guaranteed or insured by any bank or bank affiliate. These products are subject to investment risk, including the possible loss of value.