The gift of permanent life insurance is an affordable way to make significant contributions to your favorite charity. By using long-term compounding effects of permanent life insurance to fund your charitable giving, you don’t need to be wealthy to give a meaningful gift.
And, you may also receive considerable tax benefits.
To make a charitable contribution using life insurance, you typically would apply for a permanent life insurance policy on your life and name the charity as both the owner and beneficiary of the policy.
Since the charity is the owner, your annual gift of the premium payment will be tax deductible as charitable income. Throughout your lifetime, the charity will have access to the cash value of your donated life insurance policy.
If you need to discontinue your premium payment contributions on a permanent life insurance policy, any accumulated policy values would still provide a worthwhile gift. In addition, a policy benefit may be available that can prevent the policy from lapsing in the event of your total disability.
Under current tax laws, the charity would receive the life insurance proceeds from the policy on a tax-free basis upon your death, or when the policy matures, whichever comes first. No complex probate procedures will be required to settle the claim, and your estate will not owe gift or estate taxes on the amount of the claim.
Since permanent life insurance is a long-term venture, even modest annual gifts of money will have the chance to compound over time. This means you could end up making a larger contribution than you ever thought possible.
By combining charitable giving and life insurance in your estate planning, you can build a lasting legacy and influence the good works of a charity beyond your own lifetime.
This article is for educational and information purposes only. It is not intended to be used for tax advice.