Charitable Giving

Charitable Giving — Some Insurance for Your Charitable Giving Legacy


Charitable Giving — Some Insurance for Your Charitable Giving Legacy

Generally, people think of life insurance as a way to pay a lump sum death benefit to surviving family members if the main income provider dies. Life insurance can also be a convenient and flexible way to make charitable gifts.

Americans are generous people. In 2010, we gave an estimated $291 billion to charities.1 If you want to make gifts to your favorite charitable organizations as part of your estate plan, life insurance may be an attractive way to do it.

Life insurance has the potential to be a powerful and efficient tool for charitable giving.

Charitable discounts make your money go further

A life insurance policy has the potential to make a charitable gift that is larger than the amount of premiums that were paid into the policy. This gives you a way to increase your charitable legacy. Also, the premiums you pay into a policy may be  less than the death benefit payment. This is like giving a benefit to the charity at a discount. Of course, this depends on the amount of the death benefit, your health and life expectancy and the number of premiums paid.

The portion of your estate payable to your family will be reduced if you make charitable gifts during your lifetime. Life insurance can be used to “replace” some or all of the assets you previously donated. The policy pays out a lump sum death benefit to your beneficiaries regardless of the value of other assets in your estate.

Policy ownership alternatives

You can own the life insurance policy yourself or you may arrange for the charity to own it. Owning it yourself and naming the charity as the  beneficiary gives you complete control over the policy, including:

  • Death benefits — As the owner you may be able to increase or decrease the death benefits based on policy terms.
  • Premium payments — As the owner you may be able to change the amount of premium payments.
  • Beneficiaries — If you change your mind about your selected charity, you can name a different charity, or add more charities and specify how you want the insurance benefit divided among them.

Allowing the charity to own the policy may provide current income tax benefits. If you buy the policy and then transfer it to the charity at a later date, you may qualify for a charitable income tax deduction. Consult with your tax advisor and estate planner about your options.

A flexible giving tool

Life insurance has the potential to be a powerful and efficient financial and estate planning tool for charitable giving. Talk to a financial professional or tax advisor about the best way to work it into your estate plan.

1 Giving USA, a publication of Giving USA Foundation,™ and the Center on Philanthropy at Indiana University