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Wealth Replacement Trusts
A wealth replacement plan is a charitable giving plan that combines an income producing planned gift with the donor’s purchase of a life insurance policy. The purpose of the policy is to replace for the donor’s heirs the assets used to fund the gift.
For example, a donor might fund a charitable remainder unitrust (CRUT) and name himself and his wife as income beneficiaries. Then, the donor creates a life insurance trust for the benefit of his children. The trust purchases life insurance on his and his wife’s lives.
Each year the donor contributes enough CRUT income to the life insurance trust for the trustee to pay the premiums on the life insurance policy. When the donor and his wife die, the life insurance proceeds go to their children. The proceeds are free of estate taxes because the life insurance trust owns the policy, not the donor’s (or donor’s spouse’s) estate.
An alternative wealth replacement plan is for the donor to transfer some or all of his CRU income to a trust, where the trustee invests it. The accumulated assets within the trust can pass to the donor's children when he dies with the same tax benefits as described for the life insurance trust.
Click here to view a sample proposal.
Contact us for a more Personal proposal.
Information contained in this website should not be considered legal, accounting, or other professional advice. Individuals considering a planned gift to Amherst should consult with their financial advisor.
For more information about making a planned gift to Amherst, please contact the Gift Planning staff.