After Lifetime Gifts

Life Insurance Gifts

Life insurance can be used to make charitable gifts in several scenarios. One simple way to make a gift is to designate a charity as one of the beneficiaries of a policy you already own. This could be appropriate when you don't need as much coverage as you did when you bought the policy. In that case you could split the proceeds between the original beneficiary(s) and the charity.

In other cases a person has a life insurance policy that was taken out many years ago, but the original beneficiary is either no longer living or no longer needs the proceeds from the policy.

In this situation you might want to name a charity as the beneficiary and also donate ownership of the policy to charity. This will serve the dual purpose of giving a substantial legacy to your chosen charity and also of giving you an immediate income tax deduction, the size of which is related to the cash surrender value of the policy. Please note that before making any changes in ownership in your policy you should consult with a professional advisor.

Another use of life insurance is unique to estate planning. Many times a person would like to make a sizable donation to a charity but doesn't want to reduce the amount the children will inherit. This dilemma can often be remedied through life insurance. When you make a charitable donation you save money on taxes. This money can then be used to take out a life insurance policy, with your children as beneficiaries. The proceeds can then replace some or all of the asset you donated.

People usually think of life insurance for younger people, but it is often used in estate planning by people in their 60s, 70s or even their 80s. When possible many people buy a type of policy called a "second-to-die" policy, in which the beneficiaries don't receive the death benefit until the second member of a couple dies. This type of policy can be significantly less expensive than a policy that only covers one person, and it fulfills the goal of getting children their inheritance after both parents have passed away.

Life insurance can also be used in an irrevocable life insurance trust in order to deal with estate taxes. In order to use life insurance as an estate planning tool you should always consult with your professional advisors.

Please note: The information on this site is not intended as legal, tax or investment advice. For such advice, please consult a professional advisor of your choice

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