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Charitable Giving Technique:
Wealth Replacement Trust

What It Is:
By implementing one or more of the various charitable giving techniques described
previously, an individual can realize certain income and estate tax objectives, while
ultimately providing assets to a favorite charity. In doing so, however, the donor's
family will be deprived of those assets that they might otherwise have received. A
wealth replacement trust can be used to replace the value of assets transferred to a

How It Works:
The charitable donor establishes an irrevocable life insurance trust and the truste acquires life insurance on the donor's life in an amount equal to the value of the assets transferred to the charity. Using the charitable deduction income tax savings (and possibly the income flow from a charitable remainder annuity, charitable gift annuity or pooled income fund), the donor makes gifts to the irrevocable life insurance trust that are then used to pay the life insurance policy premiums. At the donor's death, the life insurance proceeds generally pass to the donor's heirs free of income tax and estate tax, replacing the assets that were given to the charity.