Many people have charitable goals they would like to achieve. We want to repay our debts to society for all the benefits we have received as well as give back to organizations who have given so much to us and to others. Many of us might feel a little frustrated. We might want to make a significant contribution but feel we can’t afford it. There is a common misconception that the only meaningful charitable giving is done by the wealthy. However, that isn’t always true.
There is one method of charitable giving that offers individuals the opportunity to do much more for charitable organizations than people may think is possible, even for individuals with limited resources. This method is using life insurance as a way to give to charity. This method is simple, effective and beneficial to the charity as well as the donor.
To start the process all you need to do is apply for an insurance policy and then pay the premiums. You don’t have to set a trust fund up with all of the expenses that are associated with unless that’s something you would like to do. Gifting insurance doesn’t require the same constant attention that some other forms of investment do. There are several ways you can set up charitable gifts by using life insurance.
In the event that you should die or become disabled, life insurance can become a self-completing gift.
A bequest can be given on your death. The life insurance proceeds will be paid to your charity without any federal estate tax owed, whether you own the policy or the charity does.
Another way is to own the life insurance policy and name your favorite charity as the beneficiary on the policy. If you are concerned that the circumstances in your family could change, you can also name your charity as a contingent or revocable beneficiary. This still gives you control and flexibility. The proceeds from the policy will pass free of estate as well as gift taxes.
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You can also give your favorite charity an existing insurance policy that you already own. Perhaps you own several difference life insurance policy. Each one could have been purchased during different phases in yor life in order to satisfy specific needs at the time, such as for your children’s education or a mortgage. Some of your needs might not be relevant anymore. You can give the policy to your favorite charity. You will be able to take a charitable donation deduction on your income taxes in the amount of the fair market value of the insurance policy at the time you transferred the policy to the charity. Any future premiums that you pay can are also deductible.
Another way of donating to a charity is to donate your insurance policy dividends if you receive them in cash. This is an economical and very easy way to make a charitable donation and get a deduction on your income taxes.
There are several reasons why using ife insurance for charitable giving is beneficial.
As long as the insurance premiums are paid, the death benefit is guaranteed, ensuring that your favorite charity will be paid. The amount the charity will be received is a fixed amount.
Using life insurance for gifting also means that you can give a larger amount than otherwise would be possible through installment payments. An individual can pay the premium cost, which is a relatively inexpensive annual expense and give their charity a much larger benefit in return. A larger gift can be given without diluting or compromising control of investments or a family business. Also assets that are designated for the family’s benefit can remain intact.
Gifting a life insurance policy is also a self-completing gift. What this means is if you become disabled or die the gift can still remain in place. Some insurance policies will waive the premium rider when an individual becomes disabled. Also upon your death, even if there has been just one premium payment made, the charitable organization will still get the full gift. Death benefit proceeds that the charity receives also are not subject to transfer costs, brokerage fees, administrative and probate costs. They also are not subject to estate or federal incmes taxes.
Giving a charity a large gift through life insurance, due to its contractual nature, cannot be effectively challenged by any unhappy heirs. There are no statutes limiting or prohibing gifts made through life insurance even when made within a short time of the donor’s death.
Substantial gifts made through the use of life insurance can also be kept private and confidential if you so choose. They are not part of your probate estate so there is no public record.
If you have been looking for a way to give back to your favoriate charitable organizations, life insurance is one of the most beneficial and affordable ways that you can do so.
