|
| . |
You wish to make a significant
gift to your favorite charity > You prefer
to make a gift from income instead of principal
> You would be content knowing your gift
would be completed after your death
|
You may be surprised to learn that
your surplus, paid-up life insurance policies
can be used to fund a gift to your favorite charity.
If, for instance, you acquired several life insurance
policies when your family was younger, with the
children now grown the coverage may be more than
you need. If you donate a policy, your charitable
deduction will be the lesser of the fair market
value of the policy or your cost basis, which
is the total of your net premium payments. Your
advisor can guide you in determining this. or
your cost basis, which is the total of your net
premium payments.
Alternatively, your annual income may be healthy, but you know that ongoing family obligations will make it difficult for you to accumulate capital. You want to make a significant gift to your favorite charity, but wonder how you will gather the resources to do so. If you take out a new life insurance policy as a gift, you can deliver a large benefit to charity from income rather than capital. You will make deductible annual gifts to the charity in the amount of the premium payments; they will, in turn, pay the premiums to the insurer.
|
F.Y.I.:
- It is important to name the charity the irrevocable owner of the policy you give it, and not just the beneficiary. The IRS does not allow deductions for your premium payments if you retain ownership of the policy.
- If you have borrowed against a life insurance policy, a subsequent charitable gift of the policy will create taxable income for you – the difference between the loan balance and the fair market value of the policy. Please consult your advisor if you are considering such a gift.
|
You can also transfer ownership of an existing policy which is not yet paid up. Your charitable deduction will be determined as if you had given a paid-up policy. The charity may reserve the right to surrender your policy or to keep it in force; you may make deductible gifts to offset the charity's premium payments if it elects to continue the policy.
|
|
