Charity Can Begin With the Gift of Life Insurance


By Nelson J. Rodriguez, MBA
Even in a tough economic environment, with a little foresight and creativity, there are many ways you can support worthwhile endeavors and gain satisfaction knowing you’ll be able to contribute for the long term.
Regardless of your income level, you can continue to support your favorite philanthropic organizations by donating through life insurance. For example, when you name your chosen charity as the beneficiary of your policy, you are contributing to a worthy cause and can benefit from potential tax deductions (as discussed below).
There are several methods of gifting life insurance as a charitable donation:

  • Designate a charity as owner and beneficiary. This benefits the charity and gives the donor a bonus in the form of income tax benefits. Premiums on such a policy are deductible to taxpayers who itemize their deductions. Consult a tax professional for details.
  • Designate charity as beneficiary. As policy owner, you retain the right to make changes to the policy including changing the beneficiary. While premium payments are not tax deductible, upon the donor’s death, the estate receives a charitable estate tax deduction for the proceeds, as allowed by law.
  • Donate an existing policy. If you own a policy with coverage that is no longer needed, you may consider donating it to a charity. The donor could irrevocably assign or transfer the policy to a charity as owner and beneficiary. This gift is generally not subject to gift tax, and, in most cases, may be eligible for a charitable income tax deduction.
  • Create a charitable remainder trust. This is a complex planning option for donors with unproductive appreciated assets, such as real estate. This transaction can be structured to benefit the donor, heirs and charity. Consult an attorney or accountant for advice.

This educational third-party article is being provided as a courtesy by Nelson J. Rodriguez, MBA. For additional information on the topic(s) discussed, please contact him at (860) 298-1053. Neither New York Life, nor its agents, provides tax, legal or accounting advice. Please consult your own tax, legal or accounting professional before making any decisions.