Life Insurance and Wealth Replacement
A common "hidden asset" for gifting is a life insurance policy that is no longer needed for its original purpose.
Example: Your family has grown and there is no longer a real necessity for retaining that $50,000 policy you purchased many years ago. The policy has a cash value of about $20,000. You can make SDSM&T the owner and beneficiary of the policy and continue to pay the premiums. By doing so, you have accomplished:
- An immediate tax savings of $5,600.
- Additional tax deductions for the premiums you pay in future years
- Giving SDSM&T Foundation a future gift of $50,000
To make a life insurance gift, contact your insurance agent for forms that will change the beneficiary and ownership designations to the SDSM&T Foundation.
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When used together with a life income gift, a wealth replacement trust may help you transfer your estate to your heirs without estate tax.
Donors who wish to replace contributed assets in their estates can purchase life insurance payable to family members, funded partly by tax savings from their charitable deductions.
The life insurance replaces the assets that we receive, and if you employ a so-called irrevocable life insurance trust, your family can receive the insurance proceeds free of gift or estate tax.
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