Welcome to 2024! We're starting this year discussing BENEVOLENCE! In a time of soaring inflation rates and the cost of living on the rise, charitable organizations are facing unprecedented challenges. This backdrop calls for a sustainable solution that empowers donors to continue their support without compromising their financial stability. Can IBC be the answer? We think it can be.
A Path to Benevolence: IBC & Charitable Endeavors
BY THE LEGACY PROJECT
“No good thing is pleasant to possess without someone to share it with.”
-Seneca
Consider the story of Julia, a philanthropist who discovered the true essence of this quote. She found immense joy in sharing her wealth by supporting a local food bank. Despite economic uncertainties, Julia’s contributions ensured that hundreds of families received meals during the holiday season. Her acts of kindness exemplified benevolence, echoing Seneca’s wisdom and highlighting the profound impact one individual can make in the community.
Benevolence is a powerful force for societal good. It goes beyond mere financial aid, embodying a moral commitment to uplift others. This act of giving enriches our communities, creating a ripple effect of positive change. For donors, benevolence is deeply rewarding, providing a sense of purpose and connection. By contributing to important causes, donors not only address immediate needs but also invest in a brighter, more compassionate future, affirming the vital role of generosity in our world. Charitable giving is motivated by various reasons, ranging from tax deductions to religious beliefs or the desire to help those in need. While the motivations may vary, the method of giving has always been the same; a donor has money in an account and gives from that account to the charitable cause. But what if there was a way for your ability to give GREW even after you’ve committed your donation? In other words, even though money has left its account, it continues to grow. If this were true, would you consider leveraging this tool to give, share, and leverage even more as the process continues to work?
This tool is called The Infinite Banking Concept.
With inflation rates soaring and the cost of living on the rise, charitable organizations are facing unprecedented challenges. The decrease in donations has affected various sectors, including churches, community drives, and nonprofits. This backdrop calls for a sustainable solution that empowers donors to continue their support without compromising their financial stability.
As a donor, we have the ability to continue to give even within this current environment. Some readers already use the Infinite Banking Concept (IBC) as a financial pillar. However, what if we considered using this powerful process to add a benevolence pillar to our Legacy? We aim to help channel donations through IBC policies to create a mutually beneficial situation for the donor and the chosen charity. Here’s how it works.
Peter, a West Point graduate and IBC practitioner, used to give $25,000 annually (~$2,000/mo.) to his alma mater’s Association of Graduates to help fund various causes at the Academy. He would donate as a part of his tax strategy to reduce his taxable income. The problem though was that once that money was“sent” as a donation, it was gone forever without the ability to continue to grow. Peter then figured out how to optimize his charitable donations such that he would donate the same amount, but the capital was still able to grow internally to his account (as if it was still there). This would allow him to give EVEN MORE as time went by. We will see how Peter accomplished this bit later.
The Infinite Banking Concept (IBC) is not just a financial strategy; it's a paradigm shift in personal finance that can profoundly impact philanthropy. This in-depth exploration focuses on how IBC can be adapted for various types of charitable giving, each illustrated through detailed hypothetical donor stories. These narratives aim to vividly showcase the adaptability, benefits, and practical aspects of using IBC in philanthropy.
1. Planned Annual Giving: The Story of Emma
Emma, a retired teacher, has always been passionate about education and desires to support literacy programs annually. By choosing IBC, Emma utilizes the policy's capacity to grow her funds through uninterrupted compound interest, ensuring her giving capacity increases over time. This growth, a hallmark of IBC, means that Emma’s contributions can be more significant each year, directly impacting more lives through her chosen cause.
2. Planned Periodic Giving: Michael's Legacy
Michael, a successful entrepreneur, wishes to make substantial donations to his alma mater every five years. Through IBC, Michael accumulates cash value in his policy, which continues to grow irrespective of his periodic withdrawals for donations. This unique feature of IBC enables Michael to make more impactful contributions over time, aligning with his personal milestones while ensuring his philanthropic impact grows alongside his financial portfolio.
3. Urgent Response Giving: Sarah’s Swift Action
Sarah, a small business owner, is moved by global humanitarian crises and wishes to respond quickly when emergencies arise. Utilizing the loan feature of her IBC policy, she can mobilize funds swiftly for urgent causes without financial strain. The ability to access funds promptly while maintaining policy growth is a distinctive benefit of IBC, allowing Sarah to support urgent needs without derailing her long-term financial and philanthropic goals.
4. Legacy Giving: John’s Everlasting Impact
John, a wildlife enthusiast, wants his passion for conservation to continue after his passing. He designates a portion of his IBC policy's death benefit to a wildlife charity. This strategic use of IBC enables John to create a lasting legacy, as the policy's growth ensures a substantial impact even after his lifetime. The death benefit component of IBC is a crucial feature that allows donors like John to plan for long-term philanthropic legacies.
As for Peter, instead of paying $25,000 per year to his alma mater, he uses that capital to fund a specially designed whole life insurance policy. For this example in Figure 1, he is only going to do that for 10 years then stop. By the end of the 10th year, he has paid a total of $250,000. Peter then donates $100,000 from his insurance policy to his college's graduate fund. However, his $250,000 still grows as if he had never taken the money out. Because he wants to continue to allocate money annually for his charitable cause, he chooses to charge himself interest at 10% as he “restocks” his account over the next ten years at $15,852 annually. Doing this results in the cash value available to him to exceed the total amount he has inserted into the policy. By the end of the 30th year, Peter has over $577,000 to donate (see Figure 1 for full illustration). If he had gone the traditional route, Peter would have had to save almost $20,000 annually for 30 years to reach the same amount of donations. With this new strategy, he has total control over his money, without risk and without changing his original charitable contribution plans. Now, do you want to guess how much he would have to donate if he would have continually thrust $25,000 into his policy yearly for 30 years? Compare that to $750,000 doing it the “normal” way. All for changing one simple thing: the routing of his money.
Addressing Misconceptions and Challenges
One common misconception about IBC is that it is less effective for direct philanthropic giving compared to traditional donation methods. Let's consider the story of Elizabeth, a donor who initially believed that direct cash donations were the most straightforward and impactful way to support her favorite charities. Elizabeth, a long-time supporter of arts education, regularly donated a significant portion of her income to various arts organizations. She believed that directly donating cash was the most efficient way to make an immediate impact. However, during a financial seminar, she learned about the Infinite Banking Concept and how it could enhance her philanthropic efforts.
Skeptical but intrigued, Elizabeth decided to explore IBC as an addition to her charitable giving strategy. She set up a policy and started redirecting a part of her donations through it. To her surprise, like Peter, she found that her contributions, channeled through the IBC policy, not only continued to support the arts organizations effectively but also grew within the policy itself. This growth meant that Elizabeth was able to increase the size of her donations over time without additional out-of-pocket expenses. Furthermore, when Elizabeth utilized her policy for charitable donations, she could do so in a tax-efficient manner. For example, if she took a loan against her policy's cash value for her donations, the loan amount generally wasn't considered taxable income. This aspect of IBC provided Elizabeth with a more efficient way to manage her funds, as she could use the policy's growth to increase her charitable contributions without incurring immediate tax liabilities.
Another important tax aspect to consider is that under certain circumstances, premiums paid into a whole life insurance policy can be structured in a way that they qualify as tax-deductible, especially if they are part of charitable giving strategies. This potential for tax-deductible premiums further enhanced the appeal of IBC for Elizabeth’s philanthropic activities.
Considering mutual benefits and tax Implications, IBC offers mutual benefits: donors gain financial flexibility and tax advantages, while charities receive reliable funding (key word: reliable). The tax efficiency of IBC, including potential deductions and estate tax benefits, adds to its appeal.
Conclusion:
In a world where stability and benevolence are often seen in separate spheres, the Infinite Banking Concept emerges as a harmonious bridge, blending these aspects with elegance and efficiency. Its sustainability, flexibility, and growth orientation make IBC a compelling choice for the philanthropist seeking to make a lasting impact. Whether it's enhancing the efficacy of annual giving, magnifying the power of periodic donations, responding swiftly to urgent needs, or leaving a legacy that transcends time, IBC adapts seamlessly to each philanthropic vision. As you reflect on the stories shared and the insights provided, consider this: How might your legacy of giving evolve if it were supported by a strategy that grows with you? What untapped potential could you unlock by integrating the Infinite Banking Concept into your philanthropic journey? The answers to these questions, and the keys to a future where your generosity flourishes unbounded, lie just a conversation away. Reach out to the Legacy Project, and embark on a path where your benevolent spirit and financial acumen converge to create enduring change.
Figure 1: Example Illustration of Peter’s Charitable Donation Over 30 yearsPAGE 06
In a unique season of uncertainty, The Legacy Project is committed to serving those who want to do something greater than themselves. Wealth is but a tool in order to transfer value from one person or entity to another. The more we can do that with control, with certainty, and with benevolence, imagine how much better the World would be. Please join us on this movement of being Legacy-minded! Thinking beyond retirement, beyond maxing out our investments, beyond the brand new car! We are sure there is joy and gratitude on the other side of it all. Let’s go.
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We have written an expanded version of this article that goes more into detail with additional analysis, numbers, and explanation. Please email us at info@legacy-wealth.org so we can send it to you!
For more information about The Legacy Project, or if you have any questions about this article, let’s connect! We’re happy to jump on a call, send you additional literature, or get you started. Wherever you are in the process, we are here for you and want to help.
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