You may wish to make the Colleges the beneficiary (or a contingent beneficiary) of a life insurance policy as a way to make a sizeable future gift. You retain lifetime ownership of the policy, keeping the right to cash it in, borrow against it, and change the beneficiary. A gift of this nature is treated much like a bequest made through your will. Because you retain the ownership of your asset (the policy), you will not receive an income tax charitable deduction for this future gift or for your premium payments during your lifetime. The policy's proceeds will be included in your gross estate, and your estate can take an estate tax charitable deduction.
You may wish to transfer ownership of a policy to Hobart and William Smith, or purchase a new policy with the Colleges as owner and beneficiary. If you make the Colleges the owner and beneficiary of a policy, you are entitled to certain tax advantages.
Example: Now that their children are grown, Mr. and Mrs. Snyder '50 have decided to review their life insurance. In the course of consolidating various policies, they decide to donate a paid-up $100,000 policy to the Colleges. They designate Hobart and William Smith the owner and irrevocable beneficiary. Since the policy is paid-up, they can take an income tax charitable deduction for the lesser of the net premiums paid or for the replacement cost if they were to buy a comparable policy today. They decide to endow a Snyder Family Scholarship Fund with their gift.
The Snyder's son, who graduated in 1968, has purchased a new $10,000 whole life policy for which he designates the Colleges owner and irrevocable beneficiary. He will make annual premium payments of approximately $950, and he can take a charitable deduction for the amount of his payments. He designates that his insurance policy will ultimately be put into the Snyder Family Scholarship Fund to increase the endowment of the family gift.
Life insurance may be used to replace the value of assets in your estate that you have given to the Colleges. You may use the tax savings that are produced by your charitable gift to purchase a life insurance policy that will pay your family members the equivalent of the amount you have donated or the amount that the family members would have received following payment of applicable estate tax.
Example: Dr. Frost, age 60, wants to make a gift that will ultimately be used to purchase equipment for the biology department, but he is concerned for his children and their futures. He creates a 6 percent charitable remainder unitrust for $500,000, which yields a tax savings to him of $66,537. He then purchases a $500,000 whole life insurance policy that will maintain his children's inheritance. His annual premium payments are $22,000, which he pays for the first three years from his tax savings and subsequently with the increased income from his trust.
You may want to set up an irrevocable life insurance trust (ILIT). An ILIT removes the life insurance from your estate to help reduce estate tax while providing other benefits. For example, upon one's death, the proceeds of the life insurance policy may remain in the trust to provide income for the surviving spouse, but stays outside of the spouse's estate for estate tax purposes. Or, the trust could be used to distribute proceeds to children of a previous marriage. Although ILITs can be expensive and more complicated than owning life insurance directly, they may be an attractive option in certain situations.
Please Note: Gifts of this nature should be carefully considered in relation to your comprehensive financial and estate plans. We strongly recommend that you consult an attorney and/or financial adviser before completing a planned gift to the Colleges.
Thank you for remembering Hobart and William Smith Colleges.
I used permanent life insurance to make a gift (and join The Wheeler Society) several years ago. I chose life insurance because, at the time of my gift, I didn't have the resources to make a big cash outlay, but for $300 a year, I could make a gift that would ultimately give the Colleges $35,000. By giving a gift using insurance, I felt as if I was making a down payment on a much bigger gift - the kind of gift I really wanted to make, but didn't yet have the resources. At my age then, the premiums were really low, which is one of the great things about life insurance - the younger you are, the less you have to pay for a bigger gift!
Please note, individual financial circumstances will vary. The information on this site does not constitute legal or tax advice. As with all tax and estate planning, please consult your attorney or estate specialist. All material is copyrighted and is for viewing purposes only. Use of this site signifies your agreement with the terms of use. This Planned Giving section has been developed for Hobart and William Smith Colleges by Future Focus.
Thank you for your interest in supporting Hobart and William Smith Colleges.
There are several ways to make your gift to the Colleges:
If you have any questions about giving to the Colleges, or to give to a designation not listed below, please contact Beth Pier at (315) 781-3079 or pier@hws.edu
