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| Insurance
Plans... |
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for the
Residents of Arizona! |
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Charitable Life
Insurance Gift
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The idea of using life insurance to
make a sizable, tax-free donation that is guaranteed at the time
of your passing is a creative and innovative method to give to
your cause. Whether it's a charity you feel passionate
about, a church that has helped your family through the good times
(and the bad), or a non-profit organization that you strongly believe in... A life insurance
donation can be the gift that ensures
financial stability to your organization for years to come.
If set up properly, this donation
(or death benefit proceeds) will not only be received by the
organization free of income and estate taxes, but it will also be
received without any delays, fees or administrative costs.
In addition, a proper charitable life insurance gift can yield
taxable benefits for you as well. |
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| Give
More
Than You Ever Dreamed |
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One of the benefits
of a charitable life insurance gift is the fact you can give a
sizable donation, for a relatively small amount in annual cost
(the premium). In other words, you may have the desire to
financially help your charity or church with a
large donation but
simply do not posses the funds to do so.
However, with the
use of a properly-constructed life insurance policy, you do have
the option to leave your charity or church that large donation (at the time
of your passing), but your out-of-pocket cost (the
premium) should only cost a very
small fraction of that amount (depending on full underwriting
review). |
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| Leave A
Legacy |
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Perhaps you have been an integral part of a
non-profit organization for many, many years. And throughout
that time, you have not only donated money, but also a substantial
amount of time and energy. So much so, that you want to
ensure that your cause is able to move forward and grow... even
without you there. Why not leave a sizable life insurance
benefit to that organization? Almost guaranteeing that your charity or church
will be there to help others, just as you were able to help it. |
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| Unique Tax
Advantages |
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Although the income tax free benefit is the most
important aspect of a charitable life insurance gift, there
can be personal tax advantages as well. If the life
insurance policy is constructed properly, both the premiums and
cash values (using "permanent" life insurance) can be used as an income tax
deduction, while the benefit can be used
to reduce your total estate tax amount that will be passed on to
your heirs.
It's important to note that tax laws are updated
and revised quite frequently. A professional tax
advisor will want to be consulted to verify all the taxable
advantages of your life insurance policy. |
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| How it
Works |
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In it's simplest form, a charitable life insurance
gift can be created in three basic ways. Each method
having it's own "pros" and "cons" when it comes to considering
this type of insurance contract.
It's important to note that all life insurance
contracts have four titles that need to be defined before a
policy can be placed. They are:
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The Insured: Who's life does the policy
protect?
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The Owner: Who has
the authority to make changes to the policy (including
surrendering the policy)?
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The Payer: Who is responsible for paying
the premiums?
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The Beneficiary: Who (or what) will
receive the death benefit proceeds?
In most cases the insured, the
owner, and the payer are all the same person, but in certain
instances, they can all be different.
And in the case of a charitable life insurance gift, separating
the insured from the owner and the payer can have significant tax advantages
for everyone involved.
Please keep in mind that with any
contract involving tax incentives, it's important that you verify
those tax
benefits with a professional tax advisor BEFORE finalizing a charitable life insurance
gift.
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Situation A |
You are the Insured. You are the Owner
of the Policy.
You
Pay the Premiums. The Charity/Church is the Beneficiary |
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| Pros |
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This is the simplest, and most common life
insurance contract to establish. With this set-up, you
retain full control of the policy, and you are free to make changes to the policy
at any time. This includes removing the non-profit
organization as the beneficiary. The beneficiary (whoever,
or whatever, it is) does receive the entire benefit amount income tax
free. In addition, the benefit is not included as part of
your estate, and therefore, will not be included as part of
your taxable estate. |
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| Cons |
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Because it's one of the easiest contracts to
create, it's probably no secret that this has the least
amount of taxable advantages. Premiums cannot be deducted.
Meaning that after-tax dollars must be used to pay the premiums,
and that those premiums cannot be deducted for tax purposes. |
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Situation B |
You are the Insured.
The Charity/Church is the Owner of the Policy.
You Pay the Premiums. The Charity/Church is
the Beneficiary. |
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| Pros |
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Because a non-profit organization is the
owner of the policy, your premiums (and cash value...if
using "permanent" life insurance) are deductible for
income tax purposes. It's important to note that
even with the premium deductions, the Charity/Church will
still receive the benefits income tax free. And just
like the example above, the payable death benefit is not
included as part of your taxable estate. |
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| Cons |
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You no longer have control of the life
insurance policy. You cannot make changes, and
cannot cancel the policy. If there is a "falling
out" between you and the Charity/Church, there is
little that
you can do.. Even if you decide to quit making the
premium payments, the Charity/Church can continue to make
them because they own the policy (but please note that
contracts set up in this fashion, can have legal
ramifications if the insured discontinues to pay the
premiums). |
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Situation C |
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You are the Insured. The Charity/Church is the Owner
of the Policy.
The Charity/Church Pays
the Premiums. The Charity/Church is the Beneficiary. |
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| Pros |
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You have no financial obligation.
Although many times, you "donate" the
premium amount
back to the charity/church, and then use that donation
towards a personal tax deduction at the end of
the year. In addition, because the Church/Charity
is paying the premiums, they are allowed to deduct those
premium payments (and cash value...if using "permanent"
life insurance) for tax purposes. And even with
all of those deductions, the benefit is still paid to the
Charity/Church income tax free. In other words,
it's possible for you to deduct your "donations" and it
is possible for the Charity/Church to deduct the premium
payments (and cash value)... All while keeping the
payable benefit as income tax free. Like the
previous example, because the organization owns the
policy, the payable benefit is not included as part of
your taxable estate. |
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| Cons |
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The Charity/Church owns everything, and
you have no control of the policy. This includes
having the Charity/Church exercise it's right to
surrender "or cancel" the policy, and immediately using
the cash value (if using "permanent" life insurance).
It is VERY important that both parties must have an
understanding with this type of life insurance
structure. |
Keep in mind that any in-force life insurance
policy (in which you are the owner) can be "gifted" to a
non-profit organization, for the tax advantages listed above.
However, it does require that you sign over the ownership (and
possible payment rights), and
change the beneficiary, to the non profit organization.
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| What To Consider |
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| Whether you are looking at life insurance as income
replacement for your family, for mortgage protection on your house, or for a
charitable donation, it's always important that you consider all
aspects of the life insurance policy to determine if this type of
contract is right for you. Especially when considering a
charitable life insurance gift, where in some cases, you lose
control with most aspects of the policy.
Consideration #1
Always ask yourself, "Is this the right thing for me?"
What are your motives, and how important is the charity, church, or non-profit organization?
The latter part of the question is very important. How solid is the foundation
you want to support? What
is the history of the organization? Are they going to be
around for the next 5 years? The next 10 years? How
about the next 50? Remember, some of these policies can be irrevocable (or permanent).
It's
important that you fully understand the organization, it's
status and it's importance to you.
Consideration #2
Consult
with the right people. Talk with your attorney, your tax
professional, and of course, your insurance broker (MAZ
Insurance), when considering a charitable
life insurance gift. Get all of the facts! Does this type of policy meet all
of your needs? Will it accomplish your goals? Is this what's best for you and for your
organization?
It's important to remember that MAZ
Insurance LLC is an insurance broker only, and cannot provide tax or
legal advice. So consulting a professional (or
professionals) in the respective field (or fields) is always a
good idea, and should be followed through completely.
Consideration #3
Make sure that your organization
is legally registered as non-profit organization. Any director
(of the
non-profit organization) should be able to show you the legal
certificate -
501(c)(3) - and prove it's non-profit status.
If you are consulting an attorney, he/she should be able check
this status for you.
Consideration #4
Once the non-profit status has been established, you'll need make
sure that your organization will accept a life insurance gift.
Set up a meeting, talk to the director, and explain to
him/her what you would like to do. Obviously, we always
recommend that an insurance broker from MAZ Insurance LLC join you
during these meetings. Remember, it's very
important that all parties involved are very clear on how the
charitable life insurance gift will function.
Consideration #5
So you've determined that a charitable life insurance gift is
right for you, and the organization agrees. Now the question
is which insurance carrier is best for you? And that's
where we, at MAZ Insurance LLC, can help. We are a statewide
insurance broker that is licensed with dozens of different life
insurance carriers. This gives us great flexibility to
determine which carrier, and what type of life insurance policy,
will meet (or exceed) all of your charitable life insurance needs.
Simply call our lead consultant, Jed Maslowski, at 480-661-1005.
Or email him at
jed@mazinsurance.com. |
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| Where To Start |
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Giving a charitable life insurance gift
is an excellent way to show how much a charity, church
and/or non-profit organization has
meant to you throughout the years. If set up properly,
there can be significant tax benefits for both you and the
organization. However, a charitable life insurance
gift should not be made "at the spur of the moment."
You will want to make sure to talk to proper
representatives, and get all the facts. Again, it's
worth repeating that MAZ Insurance LLC is an insurance
broker only, and cannot provide tax or legal advice.
To get started, give our lead consultant a
call today!.
Jed Maslowski
Direct
Phone: 480-661-1005
Email:
jed@mazinsurance.com
He can answer any questions that you may have, as well as,
gather basic information from you to determine if this is
something that is right for you.
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