3 Ways to Help a Charity With a Gift of Life Insurance

We are a charitable nation. More than 95% of American households give an average of just under $3,000 a year to charity. That means you probably do, too. But did you know that there are other ways to give to charities besides just writing a check?

Regardless of your reasons for giving, a gift of life insurance can represent a substantial future gift to a favorite charity at relatively donate heartlittle cost to you. There are several ways you can accomplish that:

1. Make a charity the beneficiary of an existing policy: If you have a life insurance policy you no longer need to support your partner or family, you can name a charity as the beneficiary of the policy, meaning that the charity will receive the policy’s death benefit when you die. While there are no current tax benefits to this approach, the value of the policy will be removed from your estate for federal estate tax purposes.

2. Make a charity the owner and beneficiary of an existing policy: Instead of simply naming the charity as beneficiary of an existing life insurance policy, you transfer full ownership of the policy to the charity. The charity will then receive the policy’s death benefit when you die. In addition to removing the value of the policy from your estate for federal estate tax purposes, this approach also provides you with current federal income tax deductions.

3. Help a charity purchase a new life insurance policy on your life: If you wish to make a substantial future gift to a charity at a relatively low cost to you, another alternative is to consider purchasing a new life insurance policy and name the charity as the policy owner and beneficiary. You then arrange to pay the premiums through gifts to the charity. This approach provides federal income tax deductions and the policy proceeds are not included in your estate for federal estate tax purposes.

Important note: Most states through their “insurable interest” laws allow a charity to be the owner and/or beneficiary of an insurance policy on a donor’s life. Since state laws do vary, however, it is important to consult with a professional advisor before making a gift of life insurance to a charity.

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