Life insurance policies are a great way to pass on a large sum of money to a beneficiary when you pass away. What many people don’t know is that you can name a non-profit organization as the beneficiary. This makes it possible to give a much bigger donation than you could have if you just gave cash to the organization during your lifetime.
You may be able to deduct the premiums that you pay towards the policy since they are treated as direct donations. Any policy without a charitable organization as the beneficiary is not allowed this treatment since it is considered a personal expense. For this to apply, you must have a permanent policy that is guaranteed to the charity.
Another deduction is available when you transfer a plan in full to a charity. You may deduct the lesser of either the fair market value of the plan or your basis in the plan in the year of transfer on your personal income tax return.
How to Give
The first option available is to name the charity as the beneficiary of the plan. This is the most direct and simplest approach. Doing this will give them the full benefit of the policy upon your passing.
It is also possible to fully donate a life insurance policy that you already have. This type of transaction is irrevocable, meaning it is transferred to the charity completely and will automatically be excluded from any estate considerations.
The last option is to coordinate a plan with the charity to have them pay the premiums for you and in exchange, you make donations of an equal amount. This is essentially doing the same thing as the first option, but it guarantees the charity that they are going to receive the benefit because they are the ones who are paying the premiums.
Using your life insurance policy as a donation can be a great tool to give abundantly to a non-profit organization. If you would like to learn more about giving your life insurance plan, call us at 513-241-8313 or click here to contact us. We look forward to hearing from you.