Ways To Help A Charity With A Gift Of Life Insurance

America is a generous country. Every year, more than two-thirds of Americans (69%) donate to charity. That means you most likely do as well. But did you know that you may donate to organizations in methods other than mailing a check or supporting a Go Fund Me campaign?

A life insurance gift can represent a significant future gift to a charity or charities of your choice at a low cost to you. There are several options for doing so:

Make a charity the beneficiary of an existing policy.

If you no longer need your life insurance policy to support your spouse, partner, or family, you can choose a charity as the beneficiary of the policy, which means the charity will get the policy’s death benefit when you die. While there are no present tax advantages to this strategy, the policy’s value will be excluded from your estate for federal estate tax reasons.

 

Make a charitable organization the owner and beneficiary of an existing policy.

This implies that instead of simply naming the charity as the beneficiary of an existing life insurance policy, you give the charity complete ownership of the policy. When you die, the policy’s death benefit is paid to the charity. This method not only removes the policy’s value from your estate for federal estate tax purposes, but it also provides you with current federal income tax deductions.

 

Help a charity obtain a new life insurance policy on your life.

If you want to make a significant future donation to a charity at a modest cost to yourself, another option is to purchase a new life insurance policy and identify the charity as the policy owner and beneficiary. You then make arrangements to pay the premiums through charitable contributions. This strategy gives federal income tax deductions, and the policy proceeds are not counted as part of your estate for federal estate tax reasons.

Keep in mind that most states’ “insurable interest” rules allow a charity to be the owner and/or beneficiary of a donor’s life insurance policy. However, because state rules differ, it is critical to speak with a professional counsel before making a gift of life insurance to a charity.

 

Benefits Of Having Life Insurance

We understand: no one wants to think about death, either for themselves or those they care about. Furthermore, many consumers associate life insurance with death. And, while it IS there in case the worst should happen, it can also accomplish so many other things without breaking the bank. Consider the following compelling reasons to buy life insurance:

It is part of a smart financial strategy.

Inadequate coverage has serious ramifications for many families. According to our 2023/2024 Insurance Barometer, four out of ten households without life insurance would face immediate financial difficulties if their major wage earner died. Life insurance can help you plan for your loved ones’ long-term health and happiness, giving you piece of mind that they are financially secure.

You need life insurance if someone would suffer financially if you died, just like you need a savings or bank account. The death benefit from your policy can help your family meet a variety of crucial financial demands, like as burial fees, daily living expenditures, and education finance.

 

It is not as costly as you believe.

Many customers assume that life insurance is either too hard or too expensive to consider, which creates a barrier to ownership, with only 57% of individuals carrying life insurance in 2023/2024. In reality, life insurance is considerably more affordable and accessible than you may believe. For example, a healthy 30-year-old can purchase a 20-year term life insurance policy with $250,000 of coverage for roughly $13 per month. When you break it down, life becomes easier to budget for and less frightening to contemplate.

 

It has the potential to accumulate cash value over time.

Permanent life insurance has a cash value or cash-surrender value, which means it can accumulate cash value while still giving a death benefit to your beneficiaries. Cash values, like most retirement and tuition savings plans, can build tax-deferred and be used for any purpose in the future—a down payment on a home, college tuition, or even retirement income.

This can be an excellent alternative because borrowing rates are typically inexpensive and there are no credit checks or other restrictions. Keep in mind, however, that you are ultimately responsible for repaying any debt as specified in order for your beneficiary to get the death benefit you intended for them.

 

Life insurance can be more than just that.

Riders to a life insurance contract or a certain type of policy might provide additional coverage. For example, you may have a hybrid life insurance policy that includes a long-term care benefit to pay for long-term care services. If this is something you will need in the future, you can take advantage of it; otherwise, your beneficiary will receive a death benefit. There are a variety of riders available to let you tailor and enhance your coverage.

 

It can help you make the most of your retirement.

If the financial obligations that prompted you to obtain a permanent life insurance policy have passed, your policy can take on new life and benefit your retirement. When properly structured, your policy can provide extra retirement income through policy loans and withdrawals, as well as alternatives for long-term care benefits.

Life insurance can also be used to augment a surviving spouse’s income, or it can be placed in a life insurance trust and passed on to your heirs outside of your estate (often avoiding both estate and income taxes).