Charitable Giving Through Life
Insurance
Most people could not write a check today for $100,000 to their chosen charity. But
through life insurance, it 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.
The advantages of using life insurance as the instrument to fund a charitable giving plan
include:
 | You may qualify for income, gift and estate tax deductions through charitable giving. |
| The gift is given without disrupting other assets reserved for your family. |
| Death benefits are paid promptly to the charity. |
| Gifts of life insurance do not increase estate liquidity needs. |
| The policy's growing cash value also may be borrowed by the charitable institution for special needs. |
The federal government has structured income, gift and estate tax laws to encourage you to share your assets with charitable organizations. The tax benefits you may receive include:
| lower income tax liability; |
| lower gift tax liability; and |
| lower estate tax liability |
There are many creative ways to make
charitable donations through life insurance. One of the simplest is to name a charitable
beneficiary to receive all or a portion of the proceeds of a policy you already own. You
may also purchase a new policy, naming a favorite charity as beneficiary. In either case,
you own the policy and you pay premiums. You can't deduct the premium payments, but you
maintain control of the policy (should you decide to change the beneficiary at some
point).
Another very simple way to make a charitable gift through life insurance is to donate
policy dividends*, if any, from cash values to a favorite charity. 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.
If you have more sophisticated estate planning needs, charitable giving may be a necessary
and valuable component of a comprehensive estate plan. In this case, life insurance in
combination with various estate planning instruments can provide you with current income
tax deductions and may generate income for you and your family.
If you are interested in making a charitable gift through life insurance, or if you have
complicated estate planning needs, consult your insurance representative and tax advisor
or attorney for further information. No matter how you look at it, charitable giving
through life insurance is a win-win situation. Your generous support of charitable
organizations will help fulfill their missions while providing you with financial
benefits.
