Life insurance may not be the first thing that comes to mind when you consider charitable giving. If you've made charitable donations previously, chances are those gifts came in the kind of funds or an appreciated asset such as mutual funds, stocks or a piece of actual estate. However, life insurance can be a beneficial way for you to meet your planned giving goals. A cost-effective and tax-advantaged charitable gift, life insurance can be a beneficial way for you to leave a legacy for your favourite charity.
Donate your life insurance policy
Policy gifting is advantageous to the charity because the organization stands to get a substantial gift. According to Estate Planning, charitable donations aren't limited for estate tax purposes so there isn't a dollar limit to the owner that you leave behind.
there's several ways that life insurance can be used in a charitable giving strategy, but one of the most beneficial methods is owner donation. a new owner bought specifically for gifting or an existing owner can be used. However, in order to gift a owner, regardless of whether it's a new or existing owner, the charity must become the owner plus beneficiary of your life insurance owner.
In addition to the windfall the charity stands to get, you get several benefits:
*An immediate charitable income tax deduction of your life insurance policy's fair market value.
*The gift reduces the worth of your taxable estate
*The cost of the owner is often a fraction of the actual benefit that you provide to the charitable organization
*Any premiums paid after the gift is made are tax-deductible
While a owner gift has plenty of advantages, you ought to be absolutely certain that you want to leave the legacy to a particular charity before the owner is officially given. owner donations are irrevocable, meaning that the owner cannot be taken back.
Make your favorite charity the life insurance beneficiary
Another way you can provide a substantial gift to a nonprofit organization is to name a charity as the primary or contingent beneficiary of your life insurance policyowner. Unlike a policyowner gift, this gifting strategy offers more flexibility because you can alter your beneficiaries any time prior to your death.
Keep in mind that naming a charity as a beneficiary doesn't provide the same charitable income tax benefits as gifting a policyowner. However, it does reduce your taxable estate by the amount of the death benefit.