Protecting Your Heirs Inheritance and Advancing HVAC&R

You have read in these pages over the years about making a gift to ASHRAE Foundation either during your life or from your estate. You may be interested in such a gift to advance the HVAC & R profession, but there may be something holding you back. Doesn't charitable giving disinherit my heirs?

The answer is no. You can make a gift to ASHRAE Foundation and provide for your heirs at the same time.

Make an Outright Gift and Protect your Heirs

Making a gift to ASHRAE Foundation saves you money immediately on your income taxes. You can use that tax savings to buy a life insurance policy to replace the value of the gift to ASHRAE Foundation to your heirs.

For example, let's assume a gift of $250,000 to ASHRAE Foundation. If you are in the 35% federal income tax bracket, that would yield a tax savings of $87,500. Consider funding a single premium universal life insurance policy with the $87,500 tax savings. The cost and availability of life insurance will depend on your age, health, and the type and amount of insurance. The life insurance could replace most if not all of the gift to ASHRAE Foundation to your heirs in the right situation. Putting a life insurance policy in a wealth replacement trust could make a gift of the policy to your heirs free of gift and estate taxes.

Generate Income and Protect your Heirs

Certain types of charitable gifts can pay income for life and help you avoid or defer capital gains taxes. If you were to establish a charitable remainder trust or a charitable gift annuity, you could receive either fixed or variable income for life. The tax advantaged nature of these gifts allow you to receive an income tax charitable deduction and reduce capital gain tax if you fund such a gift with appreciated securities.

You've probably read about these income producing gifts before and thought, "But every dollar that goes to charity reduces my heir's inheritance." Not necessarily. If you don't need the income from the life income gift to maintain your lifestyle, you can use the income to replace the gift to the ASHRAE Foundation for your heirs.

One solution might be to create a wealth replacement trust whose purpose is to make a gift to your heirs to replace the gift to ASHRAE Foundation. The plan would work like this. You could use all or just a portion of your life income gift to purchase a life insurance policy that is owned by wealth replacement trust. You can decide to replace only a portion of the gift to ASHRAE Foundation or the entire amount.

Typically upon the death of you and your spouse, the proceeds from the life insurance trust are paid to your heirs and replace the property that passes to ASHRAE Foundation from your life income gift. Because the life insurance policy is owned by the life insurance trust, the gift to your heirs is generally not subject to estate or gift taxes.

What's Holding you Back?

If concerns about providing for your heirs are keeping you from making a gift to the ASHRAE Foundation, consider the ideas in this article for ways to meet both objectives.