INSURING THE FUTURE OF WESTIES

by David Fishel

Spring 2000, Newsletter

People who love Westies are a diverse group. They come in all ages, sexes, sizes, shapes and races. They live and work in practically every part of the world. You will probably never find any two alike except in one respect. They want to do whatever they can to make sure their dogs are healthy and happy, a goal they share with the Westie Foundation of America.

The mission of the Foundation is to support basic and applied research that benefits the health and quality of life of Westies, and to share important learning with Westie owners. Since the Foundation was established in 1997, many individuals have been very generous in making direct cash contributions to help get the Foundation's work started, and as a result several important health research projects are underway.

As the fund-raising process has continued, questions have been raised about possible ways to support the Foundation in addition to, or in lieu of, a direct cash contribution. One excellent method is through insurance. The practice of giving life insurance to charities has been around for a long time, but in recent years, the practice has grown in popularity, particularly in connection with estate planning. The reason is simple. Insurance gifts can offer some significant financial advantages for givers both immediately and in connection with potential estate taxes.

There are a variety of ways the giver or his or her estate may benefit through the donation of insurance to the Westie Foundation depending on the wishes of the giver and individual circumstances, and states may have differing tax regulations which apply. So in every case, the giver should get advice from a competent authority such as a tax consultant, attorney, financial consultant or estate planner to determine how to put an insurance gift to best use.

Although there are many methods through which insurance can be used to give, the most common approach is a direct insurance gift naming a charity as the owner of either an existing policy no longer needed for family purposes or a newly issued policy.

If an existing policy is given to the Foundation, the donor is entitled to a current income tax deduction equal to the lesser of (1) the fair market value of the policy, or (2) the donor's cost basis in the policy. Using this approach the proceeds are not included in the owner's estate, or are offset by the estate tax charitable donation. If the Foundation is made the owner of the policy, it can make use of the policy's cash value during the donor's lifetime. Dividends can be used and policy loans taken out to meet current cash needs.

Another way in which an insurance gift can be made is for a donor to simply name the Foundation as the revocable beneficiary of a policy. This method allows the donor to make use of the policy's value in an emergency or to change the beneficiary up to the moment of death. While it creates no immediate income tax advantage for the giver and the policy proceeds are included in the owner's estate, the estate receives an offsetting charitable estate tax deduction which eliminates any tax on the proceeds.

Other advantages in using either of these methods include:

1. The giver can make a much larger potential donation to the foundation than through the gift of any other asset. The benefits received by the foundation can be many times the actual cost of the policy.
   
   
2. Life insurance is not subject to the delays and expenses of the probate process, so the policy's proceeds can be paid in as little as 30 days following the giver's passing.
   
   
3. Donation of insurance is a self-completing program in that the charitable pledge can be fulfilled whether the donor lives for many years or a few after the program is established.
   
   
4. An insurance donation is usually simple to implement, generally requiring no legal agreements or extra administrative costs.