Gifts of Life Insurance
Life insurance is also an excellent tool for accomplishing
philanthropic goals while realizing other important financial
objectives. Indeed, life insurance can empower individuals to make
charitable gifts they never would have dreamed possible.
Making a gift of life insurance is quite simple. If you are the
insured-policy owner you simply transfer physical possession of
your policy to the charity of your choice and file an absolute
assignment or transfer of ownership form with your insurance
company. Your company then will send a letter to the charity
showing that the charity is the sole owner of the policy. If you do
not change the beneficiary of the policy to the charity prior to
transferring ownership, the charity should name itself as
beneficiary after ownership has been transferred.
Hypothetical Example
Emmett owns a $100,000 life insurance policy with a cash value
of $40,000. No further premiums are due and he no longer needs the
coverage. He can assure that his charity will receive $100,000 at
his death by making the charity the beneficiary. Or he can transfer
ownership of the policy to them now. When he transfers ownership,
Emmet receives a charitable deduction equal to the lesser of his
cost basis or the fair market value. The fair market value is
defined as the interpolated terminal reserve plus unearned
premiums.
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