UNDERSTANDING CHARITABLE GIVING WITH LIFE INSURANCE

Very few individuals decide one day to write out a check for $100,000 or more to their favorite charity. But with life insurance, it can effectively cost very little to be so generous. Life insurance enables a charitable individual to make a substantial future gift by making small premium payments over time.

The advantages of funding a charitable giving plan with life insurance include: prompt payment of death benefits to the charity; a policy’s growing cash value also may be borrowed by the charitable institution for special needs; giving without disrupting other assets reserved for your family; and qualifying for income, gift and estate tax deductions.

There are many 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 current policy. Or a donor may purchase a new policy, naming a favorite charity as beneficiary. In either case, the donor owns the policy and pays the premiums. While the donor can’t deduct the premium payments, he/she maintains control of the policy and could decide to change the beneficiary at some point.

A very simple way to make a current charitable gift through life insurance is to donate policy dividends 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 the donor with a current income tax deduction, while the charity pays the premiums and maintains ownership of the policy.

Where there are more sophisticated estate planning needs, charitable giving may be a valuable component of a comprehensive estate plan. In this case, life insurance in combination with various estate planning instruments can provide current income tax deductions and may generate income for the insured and his/her family.

To learn more about making a charitable gift through life insurance or to discuss complicated estate planning needs, a financial planner, tax adviser or attorney should be contacted for further information. Generous support of charitable organizations can help fulfill their missions while providing financial planning benefits as well.

Please contact Susan Graham at 305-367-3416 if you or your tax advisor would like to speak to someone from our planned giving committee.