Dollars to Charity for Pennies of Cost

Transcription

1 What is this concept presentation about? When do I use it? What additional information is necessary? INSMARK ILLUSTRATION CONCEPT Dollars to Charity for Pennies of Cost Description This module illustrates deductible premiums and charity-owned values on the basis of a cents per $1.00 of death benefit demonstrating the dramatic increase in effectiveness of a gift of premiums over typical cash gifts. When to Use If you are working with a client who demonstrates a predisposition for charitable giving and needs an understanding of how efficient a gift of premiums can be. Additional Information Needed Name of the charity; Tax bracket of the client. FOR FINANCIAL PROFESSIONAL USE ONLY - NOT FOR PUBLIC DISTRIBUTION. Advanced Markets is a marketing unit of American General Life Insurance Company (AGL), a member of American International Group, Inc. (AIG). The Company, its financial professionals and other representatives are not authorized to give legal, tax or accounting advice. Applicable laws and regulations are subject to change and individuals should consult an attorney, tax advisor or accountant. No representation or warranty, express or implied, is made by AGL or its affiliates as to the completeness of the information provided. AIG All rights reserved. AGLC

2 Dollars to Charity for Pennies of Cost For: [Your Client's Name Here] Presented By: [Your Name Here]

3 Important Information Illustrated policies issued by: American General Life Insurance Company (AGL), except in New York, where issued by The United States Life Insurance Company in the City of New York (US Life). Issuing companies AGL and US Life are responsible for financial obligations of insurance products and are members of American International Group, Inc. (AIG). Products may not be available in all states and product features may vary by state. Guarantees are backed by the claims-paying ability of the issuing insurance company. This is a supplemental illustration which may contain current values that are not guaranteed. This illustration and is valid only when accompanied by an American General Life illustration/quote. Please note that this supplemental illustration may not depict values for all years shown in the full policy illustration/quote. If policy illustrated is variable life insurance, these policies are distributed by AIG Capital Services, Inc., member FINRA. Investments in variable life insurance are subject to market risks, including loss of principal. Investors should carefully consider the investment objectives, risks, fees, charges and expenses before investing. Current policy and underlying fund prospectuses can be obtained from or visit The information contained in this document is general in nature and intended for educational purposes only and is not a comprehensive analysis of the topic presented. No representation or warranty, express or implied, is made by AGL, US Life and its affiliates as to the completeness of the information in this document. The information may be subject to change and should be verified for accuracy and reliability (e.g., federal and state income tax statutes, rulings, etc. that may have changed since publication) and may be subject to differing legal interpretations. AGL and US Life cannot and do not guarantee the applicability or accuracy of the calculations within this presentation. All results are hypothetical representations for illustrative purposes only. AGL and US Life shall not be liable for any loss or damage caused by the use of, or reliance on, the tax, accounting, legal, investment or financial items contained in this material. The Company, its financial professionals and other representatives are not authorized to give legal, tax or accounting advice. For advice concerning your situation, consult your professional attorney, tax advisor or accountant. Page 1 of 6

4 Preface In the accompanying presentation, you will see the financial data from an illustration of a cash value life insurance policy owned by Charity with premiums gifted by [Your Client's Name Here] (the donor ). In the presentation, the sum of the after tax cost of the donor s gift, divided by the policy's death benefits, gives a "cost-per-dollar-of-benefit" solution (from the donor s perspective) that is very helpful when analyzing the economics of the transaction. For example, if the first premium for a $1,000,000 life insurance policy is $20,196, the after tax cost of the donor s gift is $14,137 (assuming a 30.00% income tax bracket). The discounted dollars calculation divides the donor s after tax cost of $14,137 by the $1,000,000. This results in an answer of 1.4 cents, meaning if death should occur during year 1, each $1.00 of the death benefit to Charity has cost the donor 1.4 cents. This figure changes from year to year for as long as premiums are illustrated. Favorable income tax consequences combine with significant policy values to produce an effective life insurance benefit for Charity that couples with a considerable amount of financial leverage for the donor. This is particularly evident in the following presentation. Cumulative After Tax Cost of Donor's Gift $1,200k Cum. After Tax Cost of Gifts 900k 600k 300k $424,110 0 Policy Values for Charity Donor's Cost per $1.00 of Funding $1,200k 900k Cash Value Death Benefit $1,000,000 $1.00 $.75 Cost Per $ k 300k $394,546 $.50 $.25 0 $0 This is a supplemental illustration and is valid only when accompanied by an American General Life illustration. Page 2 of 6

5 Analysis Donor's Tax Bracket 30.00% AG Secure Lifetime G Interest Rate 2.00% Policy Charges Guaranteed Initial Death Benefit 1,000,000 Donor's Analysis Death Benefit for C h a r i t y Living Values for C h a r i t y (1) (2) (3) (4) (5) (6) Year Male Age Policy Premium Gifted to Charity After Tax Cost of Donor's Gift Cumulative After Tax Cost of Donor's Gift Death Benefit for Charity Donor's Cost per $1.00 of Funding** Year End Cash Value* ,196 14,137 14,137 1,000, Cents ,196 14,137 28,274 1,000, Cents ,196 14,137 42,411 1,000, Cents ,196 14,137 56,548 1,000, Cents ,196 14,137 70,685 1,000, Cents ,196 14,137 84,822 1,000, Cents ,196 14,137 98,959 1,000, Cents ,196 14, ,096 1,000, Cents ,196 14, ,233 1,000, Cents ,196 14, ,370 1,000, Cents 18, ,196 14, ,507 1,000, Cents 21, ,196 14, ,644 1,000, Cents 25, ,196 14, ,781 1,000, Cents 28, ,196 14, ,918 1,000, Cents 31, ,196 14, ,055 1,000, Cents 42, ,196 14, ,192 1,000, Cents 60, ,196 14, ,329 1,000, Cents 79, ,196 14, ,466 1,000, Cents 101, ,196 14, ,603 1,000, Cents 124, ,196 14, ,740 1,000, Cents 150, ,196 14, ,877 1,000, Cents 168, ,196 14, ,014 1,000, Cents 188, ,196 14, ,151 1,000, Cents 209, ,196 14, ,288 1,000, Cents 230, ,196 14, ,425 1,000, Cents 253, ,196 14, ,562 1,000, Cents 279, ,196 14, ,699 1,000, Cents 306, ,196 14, ,836 1,000, Cents 334, ,196 14, ,973 1,000, Cents 363, ,196 14, ,110 1,000, , , ,110 *This is a supplemental illustration and is valid only when accompanied by an American General Life illustration. **Column (3) divided by column (4) is equal to column (5). Page 3 of 6

6 30 Year Analysis Cost per $1.00 of Funding $1.00 $.75 $.50 $.25 $ Years At Year 30 Cost of Funding Each $1.00 of Life Insurance for Charity This is a supplemental illustration and is valid only when accompanied by an American General Life illustration. Page 4 of 6

7 30 Year Analysis Cumulative After Tax Cost of Donor's Gift $1,200k Cum. After Tax Cost of Gifts 900k 600k 300k $424,110 0 Policy Values for Charity Donor's Cost per $1.00 of Funding $1,200k Cash Value Death Benefit $1.00 Cost Per $ k $1,000,000 $ k 300k $394,546 $.50 $.25 0 $0 This is a supplemental illustration and is valid only when accompanied by an American General Life illustration. Page 5 of 6

8 A Look at Year 30 Cumulative After Tax Cost of Donor's Gift 424,110 Policy Values for Charity Donor's Cost per $1.00 of Funding 394,546 1,000,000 Cash Value Death Benefit Cost per $1.00 This is a supplemental illustration and is valid only when accompanied by an American General Life illustration. Page 6 of 6