You
have a whole or universal life-insurance policy that you or your heirs don't
really need. What do you do? Well, you may want to donate it to your favorite
charity. There are basically two ways to do it.
Ask any widow or widower and
they will tell you that it is better to be over-insured
rather than under-insured. Consequently, if you have ample assets to provide
for your loved ones, then you may have life insurance you really don't need. Have
you ever considered donating your life insurance policy to charity?
Many of us tend to think of
charity as an act of signing over an immediate gift. Nevertheless, even
products like life insurance policies are important charitable contributions.
What seems like a relatively small contribution now can have a big payoff
later.
The Wall Street Journal considered the ins-and-outs of donating life
insurance in a recent article titled “Donating a Life-Insurance Policy to a
Charity.”
Basically, you have two
fundamental options when it comes to being charitable with your life insurance
policy. First, you can designate the charity as your primary beneficiary and
the proceeds will pass upon your death. This approach provides a tax benefit to
your estate, but no lifetime tax benefit to you.
Alternatively, you can give the
life insurance policy itself to the charity right now and enjoy tax benefits
right now just as with any other immediate charitable contribution. Once the
policy is owned by the charity, the charity can designate itself as the primary
beneficiary.
This latter alternative, gifting
the ownership now, also means you can get further tax benefits by continuing to
make cash gifts to the charity so it can continue to pay the life insurance
premiums. This is pretty savvy, if you currently support the same charity with
cash donations.
These are notions worth
exploring, if you truly have life insurance that no longer serves the purpose
for which it was acquired. However, do make sure your family security is
assured before taking action.
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Reference: The Wall Street
Journal (September 18, 2013) “Donating a Life-Insurance Policy to a
Charity”