With the right strategy, you can protect your family, provide for the causes you care about, and create a meaningful legacy—while staying in control. The Wealth Replacement Strategy Here’s how it works: A donor makes a significant charitable gift. • The income tax savings from that gift are then used to purchase additional life insurance. • The death benefit equals the amount the heirs would have received had the donor kept the asset in the estate. • For married couples, a second-to-die policy (insuring both lives, paying at the second death) often provides the most coverage per premium dollar. Keeping Life Insurance Out of the Taxable Estate • When estates are large enough to be taxable, steps must be taken so that the death benefits from the policy do not inflate the taxable estate. • Direct Ownership by Heirs — Adult children can own the policy outright. Parents make annual gifts (within the gift tax exclusion amount) to cover the premiums. For 2025, the exclusion is $19,000 per person, or $38,000 per couple per recipient. • Irrevocable Life Insurance Trust (ILIT) — For multiple heirs, an ILIT is often preferable. A trustee (a family member, trusted individual, or bank trust department) owns the policy. Gifts to the trust fund the premiums, and “Crummey powers” allow beneficiaries temporary withdrawal rights, qualifying contributions for the gift tax exclusion. • Trust ownership provides the additional benefit of asset protection, shielding life insurance proceeds from creditors or lawsuits. Example of Gifting Power ●
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