Have you been toying with the idea of giving to charity? Do you think of ways you could be of huge assistance to a cause? If you have life insurance, there are three ways you could make a difference to a charitable cause through life insurance.
Why Give Through Life Insurance
One, contributing through life insurance will ensure that the charity receives an even greater amount than you would gift them if you were on your own. Two, in addition to making a sizeable contribution to the charity, your other assets and investments will be untouched. Three, your beneficiaries will still receive their share and your estate will benefit from tax advantages. Plus, the proceeds to the charity will paid without delay and the gift will be private.
How to Give To Charity through Life Insurance
The charity becomes the beneficiary and owner of the life insurance
In this case, the donor will give an existing policy to the charity, meaning that the charity will become the beneficiary and owner. In this case, the gift is eligible for a charitable deduction on income tax based on the policy’s current fair market value, or on the donor’s cost basis.
In this scenario, one can donate either a permanent or term policy. However, there’s the likelihood of a donor outliving their term policy. In this case, the charity would not be given the death benefit.
Increase payment to a charity through life insurance
In this scenario, a donor has been donating to a charity for several years. He decides that he wants to increase the donation he gives through life insurance. So if he was donating $4000 annually, he’ll have contributed $40000 in ten years. Instead, he decides to increase his donation by placing the $40000 in life insurance. In order to get the best tax advantage, he gives the charity the $40000 and they, in turn, buy a life insurance policy on the donor. This way, the donation mushrooms from $40000 to almost $190000.
The charity becomes a beneficiary
This comes to play when the donor wants the reins on their policy. He, therefore, retains ownership to the policy and the charity is named as a beneficiary. They won’t have to deal with a tax deduction and can choose to change the beneficiary. However, if the donor dies, the death benefit will be paid to the charity as it is the beneficiary while his estate will also benefit through a tax deduction. In this case, the donor benefits the charity and receives a tax deduction and can leave additional assets to his heirs.
As you have seen, there is no shortage to ways you can make a difference to charity through life insurance.