Leveraging Life Insurance for Charity
Are you aware you can donate your life insurance to charity? This can work with an existing policy, or can be accomplished with a new policy. The irrevocable gift of an existing policy puts the charitable organization in full possession of the life insurance policy. Or you can purchase a new life insurance policy, give the charity ownership of the policy and name the charity as your beneficiary.
Life insurance is an excellent choice for making a gift because it multiplies the amount you are able to give. When you are committed to giving an annual gift to your favorite charity, you can use this to fund an insurance policy. Then your contributions are leveraged – payments that add up to thousands of dollars get turned into a gift of hundreds of thousands or even millions of dollars to support your charity.
In addition, your annual premiums paid into the life insurance policy are tax-deductible.
Another solution provided by life insurance is to allow someone with wealth replacement. A person with land, stock, or other property that would be heavily taxed upon their death donates their property to the charity, and receives a tax deduction. At the same time, the donor purchases a life insurance policy equal to the gift, which would create an inheritance that is liquid and tax free, since life insurance benefits can be received income and estate tax free if properly structured.
Life insurance provides a gift that is flexible, free of market risk, and has no delay or transfer costs. It can be done without diluting your business or investments, and can be done in ways that enhance rather than subtract from the assets you leave to your heirs.
For anyone with a long-term perspective and an interest in philanthropy, life insurance provides a powerful tool that should be considered as a way to leave a serious legacy to a cause or organization that you believe in.