In the search for gift opportunities, the change in conversation that occurs when that place is reached is pivotal in how the advisor is perceived in the eyes of the client.
Going from product salesperson to confidant doesn’t happen easily, but identifying and discussing gifting opportunities with sincerity and knowledge is a definitive way to change perceptions.
One of the simplest and most overlooked gifts can be found in the pile of documents that the advisor collected during their “discovery” process – the old, stale life insurance policy.
The one that’s been collecting dust in a drawer since the milestone that initiated its purchase – be it marriage, the birth of a child, or the acquisition of a first home – you know, that one. Most advisors ignore these fine old relics, advising the client to cash it in and be done with it.
First, you must determine that the family no longer needs the policy. Whatever your role as advisor, this should be a simple process of assessing need and determining if the policy you are considering for a gift fulfills whatever need there might be.
Second, you have to ascertain the value and cost basis of the policy. The tax deduction for gifts of life insurance is the lesser of the cost or cash value. Third, you must know whether or not the policy will require additional premiums and who and how they will be paid, if necessary.
And finally, you must identify a charity and make certain they accept gifts of life insurance.
Alternatively, the client may opt to make a gift to a Donor Advised Fund – simplifying the gift process though generally all the same rules will apply.
The charity has several options upon receipt of the policy – keep it and wait until the donor’s death to collect the proceeds, cash the policy in, or under the right circumstances sell the policy in a life settlement.
One who is already a giver, to use the leverage of life insurance by allocating some of their current giving dollars to life insurance.
While the charity may suffer the loss of some current dollars, it will stand in line to receive a much larger benefit in the future. For the premiums to be tax deductible for the donor, the charity should be the owner and irrevocable beneficiary of the policy.
Also, because of past abuses, some insurance companies are reluctant to underwrite large policies for the benefit of charities. And, every state has slightly different “insurable interest” rules that must be adhered to. But a diligent advisor and a charitable committed client can easily leap these hurdles.
Finding old, life insurance policies is simple – directing them to charity is a fresh solution that will change the client’s perception of you as an advisor.
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