Your alma mater helped propel you to where you are today. Your church offered guidance when you most needed it. Thanking them by donating all or part of your life insurance may be a wise way to gain a tax deduction.
There are many reasons one would choose to give this way. A gift of a paid-up policy can provide tremendous benefits to the institution, be it a church, university or other not-for-profit.
Typical donors have outgrown the need for insurance protection, have paid the policy for several years, want to ensure the completion of a significant gift and use this gift of life insurance as part of a comprehensive financial plan.
“Before you consider donating your life insurance, be sure to confirm the donation is even possible,” said Mark Lublin of Life Insurance 2.0. “First, you should ensure that the organization is a bona fide nonprofit—that it’s a 501(c)(3) organization. Ask for certification.”
Then ask someone at the organization if they will accept the life insurance as a gift. Some charities find insurance policies are more trouble than they’re worth. So double-check.
It is possible to receive a tax deduction from the gift, but the receiving non-profit has to be both the owner and the beneficiary of the life insurance policy. The Internal Revenue Service will not allow you to subtract the cash value of your policy from your taxes if you name the charity as the beneficiary but not the owner.
Third, decide whether you want to donate a term or whole life policy. Term life insurance policies do not cost as much, but they are also less enticing to charities because when the term expires on them, they are essentially useless. Whole life policies cost more, but they have a cash value that builds up the longer that premiums are being paid on them.
“There are plenty of advantages of naming a charity as the owner, beneficiary, and premium payer of a life insurance policy,” Lublin said.
It is important to mention that for a tax deduction you may not ultimately be able to claim the entire market value of a life insurance policy given to a non-profit. In fact, it is only meant to be understood as a starting point.
Lesley Reuben writes for Life Insurance 2.0. To learn more or to compare
life insurance quotes, compare term life insurance, or get an instant life
insurance quote, visit http://www.lifeinsurance20.com