Charitable Giving Through Life Insurance

Charitable giving programs can be funded in a number of ways, but none offer the unique advantages and the flexibility of life insurance. Typically, the amount of the policies death benefit is many times the total premium resulting in “leveraged” dollars. Rather than making annual donations to help fund their charities missions, it’s possible to leave amounts large enough to make a serious impact in the planning goals of the chosen charity.

We can help you research and implement a Charitable strategy. There are many different ideas to consider. Here is a list of simple techniques using life insurance in charitable giving:

  • Buy a new policy for the charity and make gifts so it can pay the premiums This can provide a very large gift in proportion to the amount gifted to the charity. The gift to pay the premiums should be tax-deductible as long as there are “no strings” attached to the gifts.
  • Buy life insurance to replace the value of an asset donated to charity – Donating highly appreciated assets to charity can provide income and estate tax benefits, but can reduce the amount left to heirs. To overcome this, the value of the donated asset can be replaced with life insurance so the heirs can receive the inheritance income tax-free. If the policy is purchased inside a Wealth Replacement Trust, the death benefit can also be estate tax-free.
  • Buy life insurance to back a future donation to a charity – Pledging a large amount to a charity can mean a lot to the charity and the donor. An efficient way to ensure payment of a future donation or pledge is by purchasing life insurance and naming the charity as the beneficiary. Life insurance provides a low-cost way to provide a large benefit to a charity. As the pledge gets paid off the charity can be left as beneficiary of the entire policy, or a portion can be redirected to the heirs or another charity.
  • Gifting insurance policy dividends to a charity – With an older dividend-paying whole life policy this strategy is easy to implement. All that is necessary is to contact the insurance company and request the dividends to be paid in cash, and then donate the dividend to the charity. These gifts can be deducible up to 50 percent of their gross adjusted income.
  • Change the current beneficiary to a charity – This is also easily accomplished. A favorite charity is named the beneficiary for either all or a portion of the policy proceeds. The ownership does not change and the beneficiary designation is revocable at any time. There is no income tax deduction for premiums paid but it does qualify for a full charitable deduction for estate tax purposes.


About Jeffrey Berson

40 years in and around the industry has made Insurance a part of my DNA. I have had the pleasure of working with and for some of the greatest minds in our industry. My "Bersonal" View is an attempt to capture some of the best ideas, the best concepts and the best practices in a way that can lead to success for others. It will certainly be my point of view, so please...don't take it "Bersonal".
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1 Response to Charitable Giving Through Life Insurance

  1. ben ward says:

    Jeff, see my newsletter about the most powerful way to do this I ever heard of.July 2013.

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