Balancing Philanthropy and Life Insurance in Succession Planning

Balancing Philanthropy and Life Insurance in Succession Planning

Australians are known for their generosity, consistently ranking high on the World Giving Index—4th out of 119 countries in 2022. While many people include charitable donations in their wills, a lesser-known option is using life insurance to support charity. If you're considering incorporating philanthropy into your succession planning, here are some ways to use life insurance for charitable giving.

Using Life Insurance for Charitable Donations

Life insurance can play a key role in your philanthropic goals. Certain policies offer flexibility, allowing you to allocate funds to charity. Common options include:

  • Policy donation: You can designate part or all of your policy payout to a charity of your choice.

  • Naming a charity as a beneficiary: You may also list a charity as a beneficiary alongside family members or loved ones.

Communicate Your Intentions

It’s essential to have open conversations with your family about your charitable giving intentions. In Australia, wills can be contested if a dependent—such as a spouse, child, or other family members—is left out. Discussing your philanthropic wishes in advance may help prevent disputes and costly legal battles.

Charities as a Contingency Plan

Some people choose a charity as a secondary beneficiary. In cases where your primary beneficiaries predecease you, a charitable organization can receive your estate, allowing your legacy to make a meaningful impact.

Tax Benefits and Charitable Giving

Incorporating charitable donations into your succession planning can provide tax benefits, especially if you donate to an entity endorsed as a Deductible Gift Recipient (DGR) by the Australian Taxation Office (ATO). Bequests to DGR-endorsed charities may be tax-deductible, helping you and your loved ones maximize the financial impact of your giving.

Bequests and Structured Philanthropy

A bequest—gifting money, property, or assets through your will—is one of the most popular ways Australians support charities. Many prefer structured giving through ancillary funds or trusts to ensure that their philanthropic legacy continues well into the future.

  • Private and Public Ancillary Funds (PAFs and PuAFs): These funds are commonly used for structured giving, enabling individuals, families, and organizations to set aside assets to support charitable causes.

  • Tax-deductible donations: Donations of $2 or more to DGR-endorsed charities are tax-deductible and can be claimed on your tax return.

The Importance of Succession Planning in Philanthropy

Succession planning allows you to balance your financial legacy, ensuring your loved ones are provided for while also giving back to the causes that matter most. Whether you're considering a bequest, naming a charity as a beneficiary, or engaging in structured philanthropy, you can create a lasting impact through thoughtful planning.

Need Help with Your Philanthropic Strategy?

If you're exploring charitable giving as part of your succession planning, Newcastle Advisors can guide you through the options. We can help you develop a strategy that aligns with your financial goals while supporting your favorite causes. Contact us today to learn more about integrating philanthropy into your life insurance and estate planning.

Matthew McCabe