By: Laurie Valentine-COO & Trust Counsel
Leveraging in the context of charitable gift planning means using the financial resources you have in a way that provides the biggest ultimate gift.
Using life insurance to fund a charitable gift is a great way to leverage your charitable giving. While you may not be able to make a gift of thousands of dollars all at once, you may have the financial resources to make gifts of modest amounts on a regular basis to cover the cost of the premiums on a life insurance policy on your life. Or, you may be in a position to give up ownership of a policy you purchased years earlier for a particular financial need that no longer exists.
The simplest way to set up a gift to charity using life insurance is to designate one or more charities as either the primary or contingent beneficiary of a policy on your life. This option provides no current tax benefits to you, but sets up a plan to fund a potentially significant gift to the designated causes at your death for which your estate would get an estate tax deduction. You may designate the proceeds to be paid outright to the charitable beneficiaries or to an endowment fund benefiting one or more charitable causes.
Another option is to make an irrevocable transfer of the ownership of an existing policy to charity, or arrange for the charity to purchase a new policy on your life with funds you provide. Such a gift is a charitable contribution for income tax deduction purposes. And, if you give the charity-owner of the policy cash in future years to pay the premiums after you transfer ownership, you will be entitled to additional deductions.
At your death, the charity can collect the life insurance proceeds immediately; there is no waiting for the settlement of your estate and usually no expense. Best of all, the amount the charity receives is usually far larger than the total premiums paid during your lifetime.
A charitable gift of life insurance—-a simple, but effective way to leave a legacy and make a lasting difference.
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The information in this article is provided as general information and is not intended as legal or tax advice. For advice and assistance in specific cases, you should seek the advice of an attorney or other professional adviser.