Gift into Perpetuity: Charitable Gift Annuities, Foundations, and Trusts

At Howard Kaye, we have a history of helping our clients immortalize their charitable giving. Our strategies can help you ensure that you continue to support your favorite charities long after you are gone, essentially immortalizing your generosity! Those same strategies can help the charities avoid their biggest risk: that revenue from a donor will cease upon the donor’s death. So how do we do this?

The advisors at Howard Kaye can show you how to properly structure a life insurance policy through a trust, endowment, or foundation so that a single tax-free death benefit that is purchased at a deeply discounted rate can create a lump sum that will support your charity in perpetuity. Here’s an example of how this works:

Suppose you purchased a $1 million life insurance policy with an irrevocable gift to a foundation. Given your age and health, perhaps that policy cost you $200,000. Upon your death, that $1 million will be paid to and invested securely by the charity so that, at a 5% rate of interest, $50,000 will be generated each year to be used by the charity. If you compare this gift, which will amount to millions of dollars over many decades, to the alternative of simply writing annual checks that will stop upon your death, the difference is astronomical. The life insurance policy allows you to create a perpetual gift for a relatively minimal single premium of $200,000.

Another tax-smart gifting opportunity can be found with charitable gift annuities. The way this generally works is you donate money to a charity, which then uses those funds to purchase an annuity. The charity agrees to use a portion of those funds to create an annuity that will make fixed payments to you (or whoever you choose) for your lifetime. The amount of those payments will vary depending on the age of the donor. The charity can receive funds as a lump sum, either immediately or when you pass, to help them with capital improvements or other special programs. Funding charitable gift annuities comes with several tax perks. First, you receive a tax deduction at the time the gift is made. Second, the annuity can be funded with appreciated stock, art, or other assets allowing you to avoid capital gains taxation, which might otherwise wipe out a slice of your donation.

At Howard Kaye, we can show you how to gift in a way that maximizes the benefits for you and the charity. Whether you need advice about how to use public or private foundations to create substantial tax-free benefits or help to develop a strategy involving funding an endowment with life insurance, our team of experienced advisors can help you. By using the leverage associated with life insurance and taking advantage of current tax laws, exemptions, and charitable deductibility, you can optimize your giving in ways that are cost-effective and enduring. Speak to us today by calling 800-DIE-RICH and start creating a gifting plan that works for you.