Even in a tough economic environment, with a little foresight and creativity, there are many ways that you can support worthwhile endeavors and gain satisfaction by knowing that you will 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. When you name your chosen charity as the beneficiary of your policy,1 you are contributing to a worthy cause while at the same time being able to benefit from the potential tax deductions.
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 a 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.
Kenneth A. Kegel is a licensed agent with New York Life Insurance Company. Neither New York Life Insurance Company, nor its agents, provides tax, legal or accounting advice. Please consult your own tax, legal or accounting professional before making any decisions. For additional information on the information or topic(s) discussed, please contact Ken Kegel at (949) 797-8292 or kkegel@ft.newyorklife.com.
1Must be a qualified charity.
New York Life does not provide tax advice. For tax advice specific to your situation, please contact your professional tax advisor. Also, state laws vary with respect to charities and insurance. Consult your legal advisor for details.