Giving a life insurance policy to your favorite charity is one of the noblest ways of giving back to the community. Worthy organizations such as hospitals, clubs, churches, schools, foundations, local shelters, support groups, etc. can immensely benefit from your philanthropic gesture. Most of these organizations depend on well-wishers for their operations to run smoothly. Dedicating a certain percentage of your wealth to the charity you care about is not only a noble gesture but can make a big difference to society.
3 Different Ways to Gift Life Insurance to charity
Name a charity as a beneficiary.
You can make a tremendous impact on your local shelter, church, or school by incorporating their name as a beneficiary in your life insurance policy. Upon your death, your favorite charity will receive 100% of your life insurance policy proceeds. While naming a charity as a beneficiary doesn’t necessarily offer income tax deduction advantages, it still reduces your taxable estate. Alternatively, you can list your favorite causes as revocable beneficiaries mainly if you are not sure of how you wish to distribute your wealth after death. In such scenarios, the one listed as charitable organizations have the option of continuing to pay the policy premiums until its maturity in case you choose to stop making the payments for one reason or the other. The beauty of listing a charity as a beneficiary is that it guarantees your privacy since the transfer of assets from your policy cannot be contested by anyone.
Donate a life insurance policy.
Feeling philanthropic? Well, just donate a life insurance policy to a charity of your choice. For effectiveness, you must donate full ownership of your life insurance policy to your preferred charity by delivering the policy itself to them. This strategy empowers you to reward your local charity with a monetary gift that exceeds your budget. In this kind of donation, the charity owns 100% of the policy, and ownership is irrevocable, but donors are still rewarded with tax deductions. Remember, the policy will not be included in your gross estate upon death unless your demise occurs within three years of the transfer.
Gifting Policy Dividends
While gifting policy dividends to charity does not provide an equal amount of benefits as compared to naming a charity as a beneficiary or donating an existing life insurance policy to charity, it can still make a difference. With this method, policyholders are required to give the dividends they receive to charity as a way of supporting their causes.
5 Things to consider when giving a life insurance policy to charity
The type of policy
Who receives what and how much.
Maintain options in case you change your mind about your charity choice in the future.
Charitable giving allows you to enjoy an abundance of peace of mind knowing that your philanthropic gesture will make a positive difference.