Supporting Charity with Your Life Insurance: Two Strategies

Supporting Charity with Your Life Insurance: Two Strategies

Clients sometimes find themselves holding a life insurance policy they no longer need and in search of a productive way to employ it.

One solution is to donate the policy to a charitable cause. Here are two good ways to do it.

If a life policy no longer serves any retirement planning or other financial need, it can simply be gifted to a charity outright or assigned to a donor advised fund (DAF). This is usually done by simply changing the life policy’s ownership. A tax benefit may accrue in this case, based on the policy’s value, rather than the death benefit amount.

Sometimes, the policy may require continued premium payments, which would become the charity’s responsibility. If they’re not happy with this situation, you could pay the premiums directly to the insurer, or gift the necessary amount to the charity, which would then make the payments (a preferable solution that makes the funds tax deductible). You can also convert the policy to paid-up status and hand it over with no further premiums due.

A specialist cited in the article says that charities would rather receive paid-up policies, which require no oversight or other administrative burden. This also relieves any concern about unforeseen events inhibiting the donor from paying the premium, thereby burdening the charity with funding the policy. In the case of charities, simple is preferred, our expert says.

The second strategy involves giving a new life policy to the charity. This can be tricky, but in the right circumstances it works quite well. For example, you could simply launch a new life policy and name the charity as the beneficiary. Several other options are also at hand.

For more information, please read:
2 Ways To Combine Charitable Giving And Life Insurance | Forbes


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