It is not uncommon for the family and other heirs of a donor to wonder "what's in it for me?" with respect to the donor's generosity. More to the point, some heirs might feel resentment that a valuable asset has been donated when it might have provided them with financial security. A wealth replacement trust can alleviate that concern.

If your client has donated a specific asset to a charitable organization, the income tax savings from the gift can be used to buy insurance on the donor to replace the value of the gifted property at the death of the donor. The insurance should be owned outside of the estate; that's where the wealth replacement trust comes in.

A wealth replacement trust can overcome a common family objection to charitable giving. The family does not inherit less because of the gift; in fact, the family may well inherit more. Additionally, family members receive cash (the life insurance policy's death benefit), not a potentially illiquid asset.

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