Give the Gift of Guaranteed Universal Life Insurance

Published by thegulguy on

Guaranteed universal life charitable gifting

I probably should have named this “How to get your name on a building for less than you think” In this article, we’ll dive into how you can use life insurance to amplify your giving and pass on huge amounts for far less than you ever would have expected, and why a GUL is the best type of insurance plan to use in most instances.

Charitable Donations, explained

You can more or less give anything anyway to charity – whether it’s cars for kids, (I think they take boats too), qualified charitable distributions from your IRA, famous paintings, or anything else of value.

In the United States, has a philosophy on taxing you only on income or assets that you have an ‘incident of ownership’ on.  Because donations of value to qualified charities are irrevocable (no backsies) the IRS is willing to give you a credit because they don’t want to tax you on something that you no longer own.

The charity also wins, because the IRS does not tax them either (because they are a non-profit that benefits society), which is good news all around.  

Donating to charity can get complex fast (there are lawyers that specialize only in charitable transactions) but they generally work in the ultra high net worth space where the gift is either huge (millions of dollars) or specific (a Van Gogh painting)

The average person donating primarily gives away cash, which while convenient and great for one time gifts, is the least tax efficient way to gift larger amounts of money to the charity of your choice.

In those instances, there are a couple different ways to give that are better than handing over cash, and each is the best choice depending on your objective.

  • Life Insurance – Maximize contributions to charity
  • Appreciated Assets – Avoid having to pay capital gains tax on the value of the donated property
  • Qualified Charitable Deductions from your IRA – Avoid the taxes on your Required Minimum Deductions by donating
  • Charitable Remainder Uni/Annuity Trust – Estate Planning
grow your charitable deduction
Grow your gift!

Qualified charitable deductions only apply to people at retirement, people often prefer donating appreciated assets to their children to take full advantage of the step up in death basis, and CRTs are predominately for individuals with net worth’s above $11 million.

With life insurance however, you can turn hundreds of dollars into hundreds of thousands of dollars.

ben feldman life insurance cost quote

Life insurance is Sexy

Most people think of life insurance as a pretty mundane product, and for the most part they are right! The vast majority of life insurance policies out there are quietly doing their job protecting the future income of their owners.

The remaining 10% of policies however, lead wildly different and exciting lives!  

Some are out there being used as multi-million dollar private retirement plans, ensuring loyalty among employees for a business owner, or turning a regular charitable contribution into a couple hundred thousand dollar windfall for their owner’s charity of choice.

As I said before, this might actually be the best way for an average American to get their name on the building. In another article, I showed my friend Nate how he could turn a portion of his existing contribution to his church into a $675,000 legacy while still being able to keep all of the current tax benefits.

Using a Life Insurance Policy to Fund Charitable Giving

Assuming you’ve made it down this far down the article, you must be interested in how this works:

Step 0 Be reasonably healthy

You can’t buy a life insurance plan if you can’t get anyone to insure you! This only works if you are in decent condition, and the healthier you are, the more you can amplify your contribution.  

As you may have guessed, along with health, the younger you are you, the more death benefit you can pass on to the charity of your choice.

Step 1Get a life insurance policy suitable for donating

You can of course donate a term policy to charity – but the chances of it being worth anything are low, except in special situations. Term is great for a lot of different use cases, but this is not one of them.

Now that we’ve knocked out term, what’s left? You’re left with a choice between Whole Life or Universal Life.

Using Guaranteed Universal Life Vs. Whole Life as a donation

One of the great things about whole life is that you can accumulate a sizable tax-free pile of cash inside the policy. Normally that would be great, but as the charity is already going to be a non-profit and not subject to taxes, the tax free aspect of the cash value is irrelevant.

When contributing to a charity, whole life does have some downsides, the biggest of which is that it is simply more expensive per dollar of life insurance death benefit than any other type of permanent insurance.

By using guaranteed universal life insurance, you can easily give twice as much value to the charity for the same premium payment (or the same death benefit for half the amount).

Take a look at the difference between this:

Whole life insurance charity

And this:

GUL life insurance for charity

Both policies have the same insured and the same annual $2500 premium, but the Protective policy will has a lump sum gift of $444,915, more than twice as much as the Forester’s whole life.

If you give $3000 a year to your Church – consider donating half or more as a life insurance policy to create a generational gift.

What if you donate more?

For those of you who make above average incomes and tithe or donate a sizable fraction of your salary every year to a cause you believe in, you can see how this can quickly become a massive gift to the charity of your choice:

$3 million life insurance policy to charity

Now obviously not everyone is able to or would want to put $15,000 or more towards the same a charity every year – but if this is you – look at the legacy you’d be leaving behind.

A $3 million dollar planned giving death benefit is an enormously generous gift that you would be able to entrust to the cause you care most about, and with that kind of giving power you’re even able to stipulate where that money would go.

At the GUL guy, we can help find you the ideal policy for your individual needs – all it takes is a short, no obligation consultation

Step 3: Transfer policy to charity

Sorry did you forget that we were only on step 2? My apologies!

Once you’ve identified how much of your annual giving you want to convert into a policy and have been approved for the best policy for you – it’s time to hand it over!

give life insurance

While you can remain the owner with the charity listed simply as the beneficiary – you would be losing out on tax benefits.

What you need to do is transfer the ownership so that you are still the payor, but the church is both the owner and beneficiary. Now you’ve got those tax deductions working for you, not against you.

Step 4: Let the charity know!

You could theoretically do all of this without the charities knowledge, but they really appreciate it if you gave them a head’s up.  You might even get a nice thank you out of it too!

I should mention here that one of the drawbacks of donating a life insurance policy directly is that you can’t remain anonymous.  Because you are still the insured, it will be pretty obvious that the gift came directly from you.

You can donate a life insurance policy to your donor advised fund, which could then pay out the benefits upon your death anonymously to your charity. That option is detailed a little further down in this post.

It could also be possible to pass the life insurance policy into a trust which receives the death benefit first and then donates to the charity without your name attached – but you would be forfeiting tax benefits and introducing more paperwork and expense at the same time – not a winning combination!

Other Considerations

It’s important to remember that this strategy to magnify your gifting only works if you are ok with donating on a recurring basis!

Donating a life insurance policy is an irrevocable gift that once you transfer, you won’t be able to reclaim it – and if you stop paying the premiums on the policy, the charity will be put into a tough decision where they can either let it lapse or use their funds to continue the payment stream.

Another thing you might want to think about – gifting life insurance doesn’t have to be limited to just charities!

If you are looking to leave a legacy gift, but you’d rather it go to a person instead of a cause, just purchase it on yourself and make them the beneficiary!

This strategy is especially popular for grandparents who want to give their grandchildren (usually through use of a trust) a substantial gift.

By using a trust – not only can you ensure that your grandkids get the money – but you can compel them to use it only for education or purchasing a house too if you choose to.

If controlling where your money goes after you are gone is a concern, rest assured, there’s a whole industry out there that can make sure that the money goes exactly where you want it to go.

If you’re a grandparent or soon be be grandparent you should check out the related article here [estim Feb 15th] about how to do this.

Legacy gifting is just one part of the estate planning process, so make sure you are working with a CFP or other qualified professional who will help you meet your goals.

Using Life Insurance to fund a Memorial Scholarship Fund

Do you want to specifically benefit the next generation?  A great way to do that is to set up a scholarship fund at your Alma Mater or another place of higher education that holds special meaning or is important to you.  Scholarship funds are a fantastic way to transfer money directly to talented and gifted students who fit your ideals and will be enabled by your gift will work to advance.

You get to pick the criteria and/or can align yourself with groups will be very specific to your wants:

Interested in creating a scholarship for Christian Athletes? Donate money directly to the Fellowship of Christian Athletes directly in your name or just use their scholarship frame work as a guideline.

Would you rather help bright young minds from minority and disadvantaged communities working getting into coding or STEM fields? Well, there is a diverse and vibrant community of great non-profits who would love to work with you as well!

The nice thing about being able to design a Memorial Scholarship while you’re still alive is that, because it’s your money, you can be demanding.  

Want to set up a scholarship fund that requires a GPA of 3.54 because that’s what you achieved in college? Go for it! You’ll find very few organizations who will turn down free money, even if there are strings attached to it.

Donating Life Insurance to a Donor Advised Fund

Have you had a minute yet to hear the good news about Donor Advised Funds?  Donor advised funds have become an immensely popular strategy in the last 10 years as more people have learned about them and their features.  

They’ve also become easier to implement as Fidelity, Bank of America, and others have rolled out DAFs with low minimums and easy online account openings make them accessible to the middle class for the first time.

daf funding increase


Without getting too deep into it, Donor Advised Funds allow you to make a contribution today with an immediate tax deduction benefit, but you don’t actually have to give the money away until later (and when you do, it must be in the form of a grant directly to another qualified charity).

Michael Kitces over at has a great infographic for how this works: daf diagram

Once you donate to your donor advised fund, you lose official control over it: (That’s why it’s a donor advised, not a donor owned fund.)

This loss of control associated with the transfer of the asset is what generates the tax deduction.  

Once the cash or property crosses over, it is no longer ‘yours’ – but you still get to advise what happens to the money in the meantime, and as long as your request is reasonable and in compliance with the regulations – they will honor your request.

Donating Without a Charity in Mind

If you don’t want to gift the money or property immediately (which is pretty much every case – because otherwise you would just make a contribution directly to the charity) you can choose what happens to the money in the meantime.

If you passed cash or appreciated stock into your DAF, you could go ahead and convert the value of those assets into a diversified portfolio without having to worry about the taxes.  In the case of a life insurance policy, you would want to keep the property as is (that’s the whole point!)

Benefits of Leaving A Legacy

“What are the benefits of leaving a legacy?”, you may ask.  It can be a remarkably nuanced question.

No matter who you are, it’s a fact that you can’t take your money with you. Assuming you choose not to spend it all while you are still alive, what should you do with it?

You are Making the World a Better Place

This will always be somewhat subjective, but by leaving money to the cause you care about, you are championing the cause and providing resources to ideas that you think will directly improve the world.

Think about that for a second – by using life insurance to fund a donation you can leave this world better off from when you had entered it.  You have been a direct source of good, and that is something you can be proud of and your loved ones can look fondly back on.

You can of course just give to the Bill and Melinda Gates foundation if you want contribute to a good cause, but if you are looking to make a more direct impact of where you live, look to the small community organizations that are fighting poverty, homelessness, drug addiction or other ills of the world.

Strengthening the Institutions that Helped You

Did you draw strength from an institution in your younger years? Are you a success in part because of the wisdom or community around it?  Why not give back financially to the Church, Boys & Girls club, Scholarship fund, or whatever organization nurtured you, and allow the next generation to have the same experience?

In a time where funding has been harder to come by if you aren’t an elite college, help the organization that helped you with a financial gift funded by life insurance.

Preserving your Memory

Some people just want to be remembered.


In ancient Egypt, the Pharaohs built pyramids – so that no one would ever forget.

Granted, I don’t know if they intended to basically become a tourist destination, but it’s hard to argue that they didn’t succeed.  How do you want to be remembered? What would you like to put your name on?

I wasn’t joking about getting your name on the building, but maybe that’s not your style. You can have your memory preserved just as concretely as any structure in the hearts and minds of your neighbors, friends and families.

If you are considering leaving a legacy and are interested in using life insurance to maximize your donation, schedule a no obligation meeting today to learn more.