Once you have created enough wealth
for your heirs to live comfortably, the
best way to utilize your estate is by giving some of it away to charity. Creating
a foundation in your own name, then giving
to charity is an excellent way to give back
to the world.
“I’ve always written about how to give to
charity so it feels good,” says Barry Kaye,
the recipient of numerous honors across
the country for his charity work over the
last 40 years. He is a professor at Florida
Atlantic University and president of Barry
“While I’ve bought billions of dollars of
insurance to offset estate taxes and optimize assets for families, we’ve also been
able to assist people with their favorite
charities utilizing insurance concepts that
not only help the charity, but help protect
family assets,” says the winner of Lifetime
Achievement and Man of the Year awards.
Some of the charities he is involved with
are the Jewish Federation, the American
College, the Philharmonic Center for the
Arts, and the Carol and Barry Kaye
Performing Arts Auditorium at Florida
Atlantic University. Kaye personally presented the Muscular Dystrophy Association
with a $50,000 check on Jerry Lewis’s annual telethon, and he gave another $50,000 to
Hurricane Katrina relief efforts.
Smart Business asked Kaye how to create a foundation and the benefits a person
can receive from philanthropy.
How does one go about creating a foundation?
See an attorney, who then will provide
the necessary trust agreements to build a
charitable foundation for the family.
Children can even serve as trustees.
The foundation can accept cash, or in
accordance with certain limitations, appreciated stock or real estate, and in so doing
save taxes as well as benefit the new foundation and the future charities to receive
grants from the foundation.
Under the law, you must give away 5 percent of the assets each year. You can choose
any acceptable charitable organization.
We have ourselves, along with clients, purchased insurance policies that we held
for more than two years, sold and then
donated the money to the charity. Our
clients have also donated policies directly
to charities as well as making their own
contributions in accordance with their
How much money does it take to start a foundation?
I’ve never heard of any kind of minimum.
Under the law, you have to give away 5 percent a year. If you put $100,000 away, then
each year you must give $5,000 to charity.
I would say people have started foundations with as little as $1 million. That put
them in a position to give away the
required $50,000 a year and now they have
Obviously you get a tax deduction, so if
you put $1 million in, it’s only costing
$650,000. But on the other hand, this is done
because someone is charitable and they’re
not looking for the tax deduction, per se.
How does starting a foundation benefit the
It’s on a gratification and satisfaction level. You come to a point in life where
you’ve been very successful and you’ve
had so many benefits that you feel like you
just want to give back.
Most people who want to give back feel
very strongly that they’ve taken so much
from society and enjoyed so much that
they want others to enjoy, too. There are
those who will give money for education or
some for religion. There are those who will
give money for health, like underwriting
research, and there are those who want to
give to the fine arts.
How can an insurance policy benefit a charity?
Say you are over 70 and purchase a $10
million policy at a cost of $250,000 for two
years. You sell the policy after two years
for at least 15 percent of the death benefit,
or approximately $1.5 million. You recover
your original $250,000 and donate to charity the balance of your approximately $1
million after taxes. The charity purchases a
last-to-die survivorship policy on you and
your spouse for a death benefit of approximately $25 million if you qualify. The cost
to you is nothing since you recovered your
original $250,000. You actually make a profit since your $1 million donation is tax-deductible and should create about
$400,000 in tax savings. Ultimately, upon
your deaths, the charity could receive up to
If you choose, the charity could be your
own charitable foundation. In this manner, you will create a substantial family
foundation. They would also receive the
allowable trustee fees. Everyone wins:
you, your insurance company, your insurance agent, your favorite charities, your
children, and the institution that bought
BARRY KAYE, Ph.D., CLU, is a professor at Florida Atlantic
University. Reach him at [email protected] or (800) 343-7424.