It is an American tradition to help others through contributions to charitable organizations each year – most of us make donations to United Way, our church or other causes. These annual gifts become routine, and we may enjoy an income tax deduction if we itemize our deductions on Schedule A, Form 1040.

Charitable Capital Transfer makes a statement about our personal values. This concept will interest you, if there is a desire to make a significant gift “in addition to” your normal gifting program.

The secret lies in leveraging the gift with the purchase of a life insurance policy – preferably on your life, or the life of your spouse or other family members. In exchange for your single premium gift, your selected charity can purchase a larger death benefit, often with a guarantee to age 100 or longer.

Who should consider a Charitable Capital Transfer Gift?

• Older client (60+)
• High individual income tax bracket (28%+)
• Has already provided sufficient income and assets for family
• Currently donates to a favored tax-exempt organization
• Desires to leave sufficient assets to the charity to continue that work.

The Power of Charitable Capital Transfer

This concept is powerful, because it is simple. After gifting a single premium to complete the purchase of the Capital Transfer policy, you – as the donor – have no further maintenance. You can also use a series of payments in place of a single premium.

How much guaranteed death benefit can you get for your money? It depends on a combination of factors, such as your sex, age, health risk, smoking status, and type of policy purchased. Here’s a rough “rule of thumb” to determine if you like the leverage potential. If you like the concept, your financial advisor will obtain a personal, customized presentation of the policy benefits and values based on your proposed gift.

How Much Leverage?
Age 50	$100,000 premium gift	$350,000 benefit to charity (3.5 times)
Age 60	$100,000 premium gift	$250,000 benefit to charity (2.5 times)
Age 70	$100,000 premium gift	$200,000 benefit to charity (2.0 times)
Age 80	$100,000 premium gift	$150,000 benefit to charity (1.5 times)

Charity Starts at Home

You determine when to take advantage of the tax benefits of Charitable Capital Transfer, as well as what type of tax benefit. Here are several options.

1. You own the life insurance policy and name your charity as the beneficiary.

       Result: There is no income tax deduction for premium because you still own it. But it is yours to control until death. At death, the full policy benefit escapes federal estate tax if it is paid to a qualifying charity.

2. You buy the life insurance policy and give it to charity immediately, or give the charity the cash and let it buy the policy.

       Result: You get a current income tax deduction for the premium paid or gifted. Since you don’t own it, the death benefit escapes federal estate tax.

        3. You buy the life insurance policy, hold it for a few years, and then give it to charity.

       Result: At the time of the gift, you get a current income tax deduction based on the policy’s fair market value (either current cash value or replacement value). The transfer of ownership is a tax-free gift.

In addition to reporting the gift on your federal income tax return, you may need to complete several other tax forms. Gifts in excess of a certain sum must be acknowledged by the charity, while non-cash gifts in excess of stated amounts may require a valuation (see IRS Form 8283).

INCOME PERCENTAGE LIMITS FOR LIFETIME GIFT
Type of Gift	Value	50% Charity	30% Charity
Cash or cash equivalents	Actual	50% of AGI	30% of AGI
Short-term capital gain property	Cost Basis	50% of AGI	30% of AGI
Long-term capital gain property	Fair Market Value	30% of AGI	20% of AGI
Life Insurance Premium	Actual	50% of AGI	30% of AGI

Source: Tools & Techniques of Charitable Plannning, 1st Ed. (2001), Appendix D. AGI means, "Adjusted Gross Income."

Summary

Charitable Capital Transfer is a powerful concept. Tax benefits abound – you choose which ones are important. More importantly, it puts you - the donor - in control of your personal legacy. And it’s hard to beat the immediate leverage (death benefit) that you created for your selected charitable organization.