Charitable Giving With Life Insurance

Charitable Giving With Life Insurance

Dec 04, 2017

If philanthropy is one of your goals, donating a life insurance policy to charity could be the strategy for you. Using life insurance to make a charitable gift may allow you to make a larger gift and can provide tax benefits at the same time.

If you currently own a life insurance policy and no longer need the coverage, you can donate that policy to charity via an ownership transfer. Your Western Fraternal Life agent can help you determine the market value of your policy, and this value may be used for a tax deduction. In cases where you continue to make the premium payment on the policy, those payments may also be tax deductible.

If you still need the current coverage you have you can purchase a new policy. When doing this, you should name the charity as the owner and beneficiary. This may entitle you to an immediate charitable deduction of the premiums paid.

In either case, as beneficiary, the charity can receive the death benefit when you pass away. There is no tax for the charity to pay when they receive the death benefit.

Consider Joe and Lisa’s situation. Both are 60 years old with two children, both of whom have finished college, are married, and gainfully employed. Now that the kids are on their own they want to increase what they give to the church. Rather than just increasing their monthly giving, they have decided to purchase a new whole life insurance policy for $100,000 and give it to the church. By naming the church as the owner and beneficiary of the policy they are able to deduct the premiums each year and will leave a much larger gift to the church when they die.

Donating a life insurance policy to charity can be a smart move under the right circumstances. You should work with your financial planner/tax adviser to review your situation and determine if a charitable donation is right for you.



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Category: insurance

Kevin Simpson

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CLU, CRPC, CLTC Sales and Marketing Manager


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