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Insuring the Future

By Shawn C. Mackey CLU

Charitable planned giving vehicles come in many shapes and sizes.  One that is too infrequently considered is life insurance. It can provide a significant gift of endowment for a fraction of the cost and effort.  As an appreciating asset, it has a leveraging effect on a donor’s generosity and the additional possibility of both estate and income tax advantages.  A donor may gift an existing policy or purchase a new policy specifically for Five Acres.  Here are examples of both:

Bob, 37, and his wife Mary have young kids and are not able to make large lump sum donations yet. The ability to make a substantial gift using life insurance appealed to them, and they contribute to it on an “installment” basis of $1,000 annually. The policy insures Bob for an initial face value of $57,807 with Five Acres as both the owner and beneficiary of the policy.  In a new policy such as Bob’s, the income tax deduction is equal to the amount of the premium contribution.*  Over the years, the face value of the policy grows, and a cash value is created which can be accessed by Five Acres along the way.  In 20 years the policy’s face value is expected to be $96,035 and the cash value $36,429. If Bob contributed to the plan until age 65 (installments totaling  $28,000) and then lived to age 75, the policy proceeds of $224,144 would be paid to Five Acres income tax-free.  Of course, there is flexibility should Bob and Mary want to change their plan later on.  

Sam and Allison are in their early 60s and plan to retire soon. After a recent estate planning review they became aware that significant life insurance held in their estate was now creating additional tax liability, so their attorney recommended a gifting strategy. Sam and Allison gifted the majority of their insurance to an irrevocable insurance trust with their children as beneficiaries. They also gave one paid-up policy to Five Acres with a death benefit of nearly $100,000 and a cash value of almost $45,000.  Sam and Alison enjoyed not only great personal satisfaction but a current income tax deduction.*  (Generally, the value of a gift of an existing policy is limited to the lesser of the taxpayer’s basis in  the contract or the policy’s gift tax value, which is roughly its net cash value.)  Five Acres will ultimately receive the policy proceeds income tax-free and can also use the cash nearer term if need be.  

In summary, life insurance is a flexible charitable giving tools.  Donors at all levels can increase their charitable dollars by establishing substantial gifts and contributing on an “installment” basis. The arrangement is private, and no publicity is involved unless the donor desires it. 

*Please check with your tax consultant regarding the tax treatment of any gift.  

Shawn C. Mackey, CLU works for Northwestern Mutual Life and serves on Five Acres’ development committee.

For information about the scholarship fund or ways to remember Five Acres in your estate plan, please contact Cynthia Nickell at (626) 798-6793 Ext. 2250 or email her.



“Where’s Scott?”

Debi and Scott Kroman's Story:

The young girls in Lark Cottage eagerly anticipate the monthly evenings with their Special Angels of the Five Acres Children’s Guild.  Debi Kroman wanted to share the experience with her husband Scott but needed to figure out how to entice him to join this group of women.

Debi and Scott are successful professionals whose parents “came from nothing” in Kansas and Europe.  They share solid values and high principles that were passed on by two very different heritages.  The Kormans consider themselves fortunate and want to pass on to the Lark girls the guidance and help they know is crucial.  Debi says, “When you look at our society, you see that life isn’t as simple anymore.  It is not as easy for kids.”  

Without children of their own, Debi and Scott decided to become involved in the lives of children who live in their own community of Altadena.  Debi became a “special friend” to one of Five Acres’ boys but found dealing with separation when he moved on after two years emotionally difficult.  When one of Debi’s clients suggested she join the Guild, she knew she’d found the ideal way to “give back.”   

Scott agreed to come to the Guild’s annual summer barbecue for the Lark girls and “flip the burgers.”  The girls eyed him warily at first but soon decided they liked having a man around the house.  So much so that at the next Guild gathering the girls asked, “Where’s Scott?”  He’s been a regular ever since.

When asked, “Why Five Acres?” Debi and Scott agree that observing up close how their donations are used, the stability of staff who stay for decades, and the stories of “hopeless” cases turning into successes confirm that there’s no better place for them to invest their time and resources.

Debi and Scott have wisely created an estate plan that relieves their families of difficult end-of-life decisions and also ensures that their legacy at Five Acres will live on. 

For information about how you can provide for your loved ones as well as the causes you care about, please contact Cynthia Nickell at (626) 798-6793 Ext. 2250 or email her.