Asset Replacement Plans
An Innovative Way to Realize Your Charitable Goals
If leaving sufficient assets to your heirs is your primary concern but you also wish to perpetuate your commitment to AJC, you may want to consider an asset replacement plan. This charitable estate-planning tool utilizes a charitable remainder trust coupled with life insurance.
You can provide a major planned gift to AJC and replace the amount of that gift with an equal or even greater endowed benefit from a life insurance policy for your heirs. In this way, your loved ones will receive bequests from your estate assets just as they would have otherwise, while also gaining some tax benefits.
Transferring a highly appreciated or low-yielding marketable asset into a charitable remainder trust creates an income stream and avoids any capital gains tax. In addition, the charitable income-tax deduction reduces your current income taxes. You can establish an irrevocable life insurance trust using the income from your charitable remainder trust to pay a portion of or your full annual premium payments.
By replacing the value of the asset gifted to AJC, your beneficiaries may receive more of their inheritance than if you were to sell the asset and pay capital-gains and estate taxes. The life insurance proceeds are generally free from income taxes and are not included in the estate. The unified tax credit provides an effective means of redistributing your assets while further reducing your estate-tax exposure.