Leveraging Life Insurance for Charitable Giving
Are you looking to leave a bequest to your favorite charity? The use of life insurance can be a very effective tool for charitable giving. Most charities actually have departments that are dedicated to handling planned giving by donors whether it is in the form of life insurance or other assets from their estates. There are several ways that you can use life insurance to give to your favorite charities.
You can make the charity the beneficiary of your current policy. This can be done by changing the beneficiary on your policy to your favorite charity. If you would like to give to more than one charity, you can specify which charities and what percentage of the death benefit will go to each. This is the simplest way and provides the most flexibility since you can change your beneficiary designations at any point until death. Because you own the policy, the amount of the death benefit will be included in your estate but your estate will receive an offsetting deduction.
You can donate an existing policy to a charity. In this instance, you would sign over all rights in your policy to charity. By giving away all of your rights in the policy to the charity, you would receive an immediate tax deduction for the fair market value of the policy or your cost basis, whichever is less. If you chose to continue making premium payments after gifting your policy, you should be able to take a tax deduction on those payments. It is best to make the payments to the charity directly which would in turn pay the premium to the insurance company.
In some instances, you could even have the charity take out the policy on you. In this case, you would make tax deductible donations to the charity equal to the premium payments for the policy. The charity would use the donation to pay the premium on the policy.
Life insurance provides leverage that other products do not. For instance, if you give a sizable donation each year to charity, you might be able to leverage those donations into a much larger amount at your death through life insurance. Instead of paying the donation directly to the charity, you could buy a policy with a premium equal to your yearly donation amount. Also, if you are older and already have an amount set aside in your will for a charity, you could buy a single premium paid up policy which could result in a much larger donation than the original amount set aside.
Life insurance is an excellent vehicle to leverage donations in order to maximize giving. Before you decide to give your policy to a charity or purchase a new policy with the intent of charitable giving, you should consult with a tax adviser so that you understand all of the tax implications. We would be happy to answer any questions that you might have about charitable giving through life insurance. Please feel free to give us a call at (888) 687-9444 or email us at info@archstoneagency.com if you have any questions.
Archstone Insurance Services, LLC is an independent agency that shops over 40 of the top life insurance carriers to provide huge savings on life insurance coverage for our clients. We are happy to answer any questions you might have about any of the insurance products we offer, your planning needs or your existing coverage. Feel free to call us directly at (888) 687-9444 or email us at info@archstoneagency.com. You can also visit our website at www.archstoneinsurance.com.
