You want to make a charitable gift to help an organization or person in need, to support a specific cause, recognition as naming opportunities at school or university? Maybe you’ll do it just for the tax incentives. There are a number of reasons, and life insurance can be one of the most efficient tools to achieve this goal. So the question becomes, how does it work?
Let me list the ways.
1. Make charitable heirs existing policy.
Perhaps you have a policy that you do not need anymore. Make charitable heirs, and the policy will not be included in your estate on your death. It also allows you to maintain control over the cash value and the heirs named. If you want or need to change the charity named as beneficiary, you can.
2. Make charity the owner and beneficiary of the policy.
It gives you both a reduction in the current tax by removing the policy from your estate. Once you have a gift policy, you no longer have control over values.
3. Buy a new policy on your life.
Insurance is a very efficient way to provide a great future inheritance to charity in your name without the need to write a big check today. Premiums are given directly to the charity, which then pays the premium on the policy. Charity also has a cash value as an asset. I use this concept in planning my own.
Many charities would rather have a down payment, but if you can not write a check big or do not want to part with your cash today, a gift of life insurance is the most efficient method to leave a great legacy in your name.