Using life insurance for charitable giving allows you to make a larger gift than you may have ever dreamed possible. That’s because the premiums you pay are generally significantly less than the life insurance death benefit that will pay out at your death.
There are two ways to make a life insurance charitable gift. You can name the charity the primary or contingent beneficiary of the policy, or you can transfer ownership and all rights in the policy to the charity.
Naming one or more charities as the primary or contingent beneficiary of a life insurance policy is simple. Doing that provides no current tax benefits to you, but does set up a plan to fund a potentially significant gift to the named charitable beneficiaries at your death for which your estate would get an estate tax deduction.
Transferring ownership of a cash value policy to a charity is a charitable contribution for income tax deduction purposes. If the policy is paid-up, the charity holds it until you die and collects the death benefit. If premiums are still due on the policy, cash gifts you make in future years to the charity to provide the funds for premium payments are additional charitable gifts.
If you get to the point you can no longer provide funds for future premiums, or don’t want to do that from the outset, the charity can cash in the policy or adjust the death benefit to take it to “paid up” status.
Leverage your charitable giving through a life insurance gift.