5 June 2012 0 Comments

Life Insurance And Charitable Giving

Some people use Permanent Life Insurance as a way to leave cash at their death to their favorite charity or religious or educational institution (501c.3 organization).  I’ll discuss two ways to create this charitable legacy at your death:  the direct gift of a life insurance policy and a charitable remainder trust.

The Direct Gift

You can simply transfer ownership of an existing policy to the 501c.3 organization, or apply for a new policy with them as the owner.  Ongoing premiums would either be made to the charity with directions that they should be used to keep the policy going, or they could be paid directly to the insurance company on a policy that is owned by the 501c.3 organization.   The cash value of a policy that is transferred and any ongoing premium paid by the donor are tax deductible to the extend allowed by the IRC for 501c.3 organizations.

There’s nothing complex about this and it is a way to be remembered after you’re gone, if that’s important to you. Before doing this, however, be sure that the recipient organization wants this deferred giving as opposed to your contributing an amount equal to the policy’s premium for current needs.  If they’re struggling to meet their current budgetary requirements, then a gift that is only available at the death of the donor may not be practical.

Next I’ll be discussing the use of a Charitable Remainder Trust and what roll life insurance plays in such a transaction.

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