Giving Stock or Bonds
Gifting stock, instead of cash, to a charity as a donation can greatly benefit both parties. If the stock has increased in value from the time of purchase, the owner can avoid paying the capital gains tax by donating the security to another party. When the security is being donated to Global Soccer Ministries, the total amount will still be eligible for a tax deduction. Since taxation is avoided on the stock donation, the giver will be able to make a larger donation.
For example, let’s say you were looking to make a $1,000 donation to GSM. You could either give cash or donate stock. Let’s assume that the you bought stock for a original purchase price of $700, but it is now worth $1,128.55. To make it simple, let’s assume capital gains tax is 30% of the stock’s appreciation. Selling the shares for cash would net about $1,000 after capital gains tax (1,128.55 – (1,128.55 – 700)*0.30). In this case, you should be indifferent between donating the entire stock or giving cash, as both choices will cost you $1,000. However, GSM can receive more benefit from a stock donation, as they will receive a gift valued at $1,128.55, instead of the $1,000 in cash.
Why Use Life Insurance To Make Charitable Donations
There are several ways to use life insurance to make a charitable donation and leveraging you support to Global Soccer Ministries International. In many cases, this can be the most effective and convenient asset that you can give.
Charitable Giving Riders
Charitable giving riders are a relatively new addition to the family of riders available in modern life insurance policies. For example, these riders can be attached to policies with face values of over $1 million and then pay an additional 1-2% of the policy’s face value to GSM. These riders usually come at no additional cost and often do not increase the premium or reduce the cash value or the death benefit of the policy, and the riders effectively eliminate the need to create, pay for and administrate separate gift trusts until the death of the insured. Check with your insurance agent and see if this ride is available to add to any of your exsisting insurance policies.
Although this process is a bit more involved than merely purchasing a charitable gift rider, policy donations also provide a much greater benefit to you as well as to GSM. Gifting a life insurance policy can greatly reduce your taxable estate, which can save thousands of dollars in estate taxes for upper-income taxpayers. Gifting a policy can also yield a current income tax deduction of the policy’s fair market value.
Perhaps most importantly, is that GSM will receive the entire face amount of the policy upon the death of the insured. The cost to the donor will only be a small fraction of that amount each year, and any premiums paid after the date of the gift will be deductible as well.
There is also no limit on the size of the policy that may be donated, since charitable donations to GSM have no ceiling for estate tax purposes. This strategy also does not impede your current investment strategy, and can also provide a useful way to dispose of an unwanted policy that was originally purchase to cover a need that no longer exists.
Naming a Charity as Beneficiary
Naming GSM your choice as the beneficiary of your life insurance policy is the simplest way to provide a charity with the death benefit proceeds from a policy, although it does not offer the income tax advantages that come with gifting a policy. However, it will still reduce your estate by the amount of the death benefit. If you are unsure of exactly how you want to apportion your assets after death you can list GSM as a revocable beneficiary if you so choose. This gives you the flexibility in your future planning in case you financial situation changes.
Naming a charity as a beneficiary also ensures the privacy of the transaction, which can be important to you if you wish to keep the gifting intentions secret from others. Transfer of assets from an insurance contract is also absolutely incontestable, thus rendering anyone contesting the estate settlement powerless to stop it. Furthermore, you remains in a position to change the beneficiary prior to your death. If you choose to stop paying the premiums, the charitable organization can choose to continue the process or can allow the policy to lapse.
Gifting Policy Dividends
Although gifting policy dividends will not provide the same amount of benefit to GSM as the other strategies discussed, it is possible for you to receive the dividends paid to your insurance policies in cash and donate them to GSM. The dividends donated are deductible in the same manner as premiums paid on a gifted policy, and this strategy does not require any additional cash outlay from you. If you have a corporations you can also use the gifting policy dividens strategy as a giving policy to realize tax and community benefits.