 Helpful Articles
from David Vollrath,
Union County Foundation Executive Director
The Foundation encourages you to work closely with your professional advisor(s)
as you develop your estate plan and consider your present and future charitable goals. |
Gifting Life Insurance
(Part of a series of articles on charitable giving and the Union County Foundation
by David Vollrath - Exec. Dir.)
Life insurance is an important part of any comprehensive financial plan. For many
young families, life insurance can be the difference between being able to "carry on" financially when
faced with the loss of a family’s primary wage earner or having to significantly reduce the family’s standard of
living. For others, however, they may have reached a stage in their lives where the safety net provided by life
insurance is no longer needed. In such cases it can often make good sense to consider gifting the life insurance
to a favorite local charity. Such a gift is easily executed, can have substantial favorable impact on the receiving
charity, and produce charitable tax deductions for the donor.
An outright gift of an insurance policy to a qualifying charity will generate a charitable tax deduction up to
50% of adjusted gross income. Because there is no capital gain element involved in the gift it is treated similar
to a cash-type donation. The allowable deduction is equal to the lesser of the policy’s value (generally the cash
surrender value) or the donor’s basis in the policy, meaning how much has been paid into the policy. Once the charity
is the owner of the policy the charity may elect to hold or surrender the policy. If a charity desires current
revenue they likely would cash in the policy. If the charity would rather ultimately receive the death benefit
they would opt to hold the policy.
If the policy you donate to charity is not completely "paid up" then any future premiums the donor pays
would qualify as a charitable deduction. If a donor does not want to actually gift the policy to charity another
alternative would be to name a charity as the beneficiary (or as a partial beneficiary). This would provide a deferred
gift to charity while potentially reducing the size of the donor’s taxable estate by the amount of the death benefit
(depending on the donor’s estate tax bracket).
All things considered gifts of life insurance can work well for the donor and the receiving charity. The donor
receives a substantial charitable deduction and the charity benefits from a present or deferred gift depending
on their needs.
The Union County Foundation encourages you to consider your present and future charitable goals. The Foundation
is equipped to help you achieve these goals by providing: planned giving and estate planning resource information,
charitable gift annuities/life income plans, and a broad array of charitable choices
Please call us at 937-642-9618, email us, reference our website, or stop by our Marysville
office at 126 N. Main St. We are committed to helping you.... “preserve your footprint in time.” |
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