The Benefits of Benevolence
Giving to your favorite charity through life insurance can cost you very little to be very
generous.
Life insurance enables you to make a substantial future gift by making small premium
payments over time. When you die, the premiums you've paid allow you to leave a
significant charitable gift.
The charity will benefit greatly, but so will you. The advantages of using life insurance
as the instrument to fund your charitable giving are many:
 | You may qualify for income, gift or estate tax deductions |
| The gift is given without disrupting other assets reserved for your family |
| Death benefits are paid promptly to the charity. These benefits are not part of probate. As a result, life insurance gifts are not normally a problem with heirs. |
| Unlike cash bequests, gifts of life insurance do not increase estate liquidity needs. And they generally aren't subject to probate costs. |
| The charity can borrow from the policy's growing cash value for special needs if the charity owns the policy. Any outstanding policy loans and interest at the time of death are deducted from the death proceeds. |
| Your generous support of charitable organizations will help fulfill their missions - while providing you with financial benefits as well. |
Charitable
Giving Tax Benefits
The federal government has structured income, gift and estate tax laws to encourage you to
share your assets with charitable organizations. A charitable giving plan may help lower
your income taxes, as well.
If you itemize deductions and send your cash donation to the institution to cover the
premium payment, generally you may deduct the amount of the payment by an amount up to 50
percent of your adjusted gross income. You may also avoid gift taxes, since gifts are
fully-deductible for federal gift tax purposes (with some exceptions). Since death
proceeds payable to the charity don't incur federal estate taxes, you may also avoid
estate taxes - this is true even if the charity doesn't own the policy and is only named
as the revocable beneficiary.
Creative Contributions
There are many creative ways to make charitable donations through life insurance. How?
An easy way is to name a charitable beneficiary to receive all or a portion of the
policy's proceeds. Or, you may purchase a new policy, naming a favorite charity as
beneficiary. In either case, you own the policy and pay premiums yourself.
While you can't deduct the premium payments, you maintain control of the policy (should
you decide to change the beneficiary at some point).
Another way to make a charitable gift through life insurance is to donate policy dividends
from cash values to a favorite charity. Yet another option is to make cash donations to
the charity for the purpose of purchasing life insurance. This provides you with a current
income tax deduction, while the charity pays the premiums and maintains ownership of the
policy.
Credible Charities
Americans are flooded every day with donation requests from local, state and national
charities. How do you know if the organization you're considering is credible?
There are a few questions to ask before making your contribution:
| What is the charity's full name and address? |
| What goal is the charity trying to accomplish? |
| Is the charity licensed by state and/or local authorities? |
| What share of contributions go toward administrative costs and what share go toward the actual cause? |
If you get answers that
meet your expectations and decide to contribute, write a check so you have a receipt. Make
it payable to the charity and keep records of your contributions.
The Council of Better Business Bureaus offers these tips to remember when you're asked to
donate:
If you're not familiar with the organization, ask for written information about its programs and finances.
Don't give cash. Write a check.
Find out if your contribution is tax deductible and keep a record.
You can get free reports for up to three organizations by writing to: The National Charities Information Bureau, Dept. 42, 19 Union Square West, New York, NY 10003.
