Financial advisors often encounter situations where leaving a charitable legacy becomes an important objective for their retired or elderly clients. Helping your clients achieve their philanthropic goals while also preserving sufficient assets in their retirement portfolio can become a balancing act for advisors.
While the outright donation of a life insurance policy to a cherished cause is a popular planned giving strategy, there are a number of potential drawbacks that the advisor should discuss with the client:
IIf the donor does not intend to make all future premium payments, most non-profits will not be interested in accepting the policy.
Non-profits are reluctant to spend general operating dollars to maintain a policy where the death benefit may take many years to realize.
Rather than wait years for a donated policy to mature and realize a pay-out, many non-profits prefer cash donations that can be invested immediately and increase in value over time.
Selling an unwanted life insurance asset in the secondary market can be an effective strategy to generate sizable cash donations to nonprofit and religious organizations. Another advantage to selling a policy today and then donating the cash to a charity enables the client to potentially witness the impact of their donation while they’re still living.
Click here to learn why life settlements are an intelligent option for advisors and their clients who are looking to generate liquidity for charitable donations.