Question:

Is it possible for me to donate my Life Insurance to my favorite charity organization ?

Ben

San Francisco, California

Answer:

YES! Great question Ben. A Life insurance policy is an excellent way for charitable giving. Yon don’t only make a substantial donation to charity, but also may benefit from tax rules that apply to gifts of life insurance. A gift of life insurance can enable you to leave a much greater gift to your favorite charity than may have been possible during your lifetime.

There are several different ways you can give your life insurance policy to charity. Each method has different advantages and disadvantages to both you and the charity.

• Name the charity as a beneficiary on your policy. Upon your death, your death benefits will be passed on to the charity. But you are not able to take the charitable income tax deduction for the premium payments that you make. With this method, there are no gift tax implications. The proceeds of the policy will be includable in your taxable estate, but you will receive an offsetting estate tax charitable deduction.
• Donate an existing life insurance policy to the charity. You can claim an income tax deduction for either the tax basis or the fair market value of the policy for the year of the donation. You can then make deductible cash gifts to the charity, which the charity can use to make the premium payments. The proceeds of the policy may be includable in your taxable estate, but you will receive an offsetting estate tax charitable deduction.
• Donate money to the charity and have the charity buy the life insurance policy. You make income and gift-tax-deductible donations to the charity, and the charity makes the premium payments. The proceeds of the policy will not be included in your estate for estate tax purposes.

There are also some other factors that may influence your decision, like tax rules and your specific specific state laws their in California. Have a Nice Day.

-Author