Consider Donating Life Insurance To Your Favorite Charity
To The Editor:
If you are a concerned, compassionate or “big hearted person,” donating a life insurance policy to a charitable cause is one way to benefit others with a large gift and, in some cases, yourself – with a possible tax deduction. You can donate a new policy or put an existing policy that’s no longer needed to good use. First make sure the charity is a nonprofit organization with 501(c) (3) status, and ask if the organization will accept a life insurance donation.
Permanent life insurance policies, such as whole life or universal life, are the most appropriate choices for charitable giving. A term life policy may expire before the insured dies, so it doesn’t work well as a dependable, longterm gift.
To benefit from a tax deduction, you can give an existing or new life insurance policy outright by naming the charity as both the owner and the beneficiary of the policy. The cash value and any premiums you pay after making the gift are tax deductible. The donation also decreases the amount of your taxable estate.
Another option is to maintain ownership of the policy and name the charity as a beneficiary. This doesn’t provide a tax deduction, but gives you flexibility. You can name a different beneficiary later if you change your mind.
To learn the best way for you to donate a life insurance policy to your favorite charity is to talk with a tax adviser and estate planner. Outright gifts of life insurance policies are irrevocable. In other words, once you give it, you can’t take it back.