Contrary to what many people think, giving to charity isn’t all about pity but love. Charity and love are co-related, so when you are giving to charity, you are not only giving money but spreading love. Yes, charity is a personal choice, but making charitable donations using life insurance is one of the best ways of touching millions of lives globally.
Here are 5 creative ways of using life insurance to donate to charity.
Name the Charity of your choice as Beneficiary and owner of your life insurance.
Consider taking stringent measures to ensure that your favorite charity benefits to the maximum from your death proceed. The most viable and practical way of achieving your objective is by listing your preferred charity as the owner and beneficiary of your life insurance. Beneficiaries can either be revocable or irrevocable depending on your wishes as the donor. In an event where you’re unable to continue making the policy’s premiums payments for various reasons, your chosen charity has a right to decide whether to allow the life policy to elapse or continue paying the premiums. The beauty of naming any charity as a sole beneficiary of your life insurance is that it guarantees their privacy during the proceeds transactions.
Allow your charity to purchase a new life insurance policy on your life.
Do you wish to give a super-sized donation to charity? Well, consider helping your chosen charity to purchase a new life insurance policy on your life. Go ahead and allow the charity to own the policy as well as be the beneficiary. This approach makes it possible for your favored charity to enjoy reduced federal income tax deductions since your life insurance policy proceeds are exempted from federal estate taxes.
Gift Policy Dividends
While policy dividends have limited benefits as compared to other life insurance charitable donation strategies such as charitable giving riders, policy donations and naming your chosen charity as owner or beneficiary of an existing policy, your donated dividends can make all the difference. The good thing about this approach is that it comes with multiple tax deduction benefits for your best charity.
Charitable Giving Riders
Most donors with modern life insurance policies opt to use Charitable giving riders as a giving strategy provided their face values are above $1 million and are able to pay the required 1-2% of its total value to their chosen charity. Interestingly, charitable giving riders do not attract any additional costs or even reduce the policy’s proceeds in any way thus granting maximum benefits to your designated charity.
Alternatively, you can choose to gift your existing life insurance policy to your favorite charity at a reduced estate tax and minimal income tax deductions. In the long run, your preferred charity will receive the maximum face value of your policy upon your death as the insured.
The Bottom Line
Using life insurance to donate to charity is a noble act that can make the world a better place for humanity.