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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.



They Should Be Supported

Pauline Ledeen’s Story:

Up the narrow streets at the top of the foothills in southwest Pasadena is Pauline Ledeen’s beautiful home with a 360-degree vista of the city.  At 94 years of age you’d expect to find her relaxing on the veranda taking it all in.  She’s certainly earned retirement.  But Pauline is still putting her law degree to use for those who are on the margins of society. She still goes to the office at the Jewish Committee for Personal Service and has a caseload of inmates in county jail.  

{mosimage}Years ago Pauline tutored children in the second grade at Pasadena’s San Rafael School where she met a little girl who carried a snack of carrots in a sack on her belt.  Pauline commented that her mother must love her very much. The little girl replied that she didn’t have a mother. Pauline deduced that the child was most likely a resident of one of Pasadena’s orphanages.

Someone eventually introduced Pauline to Five Acres. “I became interested in your little people and decided to contribute. I like the concept. These little kids have a home, not like an orphan’s home, not just a place where kids are dumped.  Yours are good programs. They should be supported, that’s all.”

Giving comes naturally to Pauline who grew up in a family whose “charity box” was set out every Friday night into which all members of the family emptied their pockets. “I am glad I grew up with that consciousness. My life has certainly been enriched by giving.  

Pauline’s commitment to help people on the margins of society led her to include the children of Five Acres in her will.  “God has blessed me with meeting people like the folks at Five Acres.” 

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