Charitable Gifting

Individuals that are charitable during their live tend to want to be charitable at their death. Additionally, many are desirous to be very generous during their lives and make a large substantial gift to a Charity or Ministry, yet their income may not permit it, however, by using “Charitable Gifting” through the use of Life Insurance they are able to do so at a low cost.

Charitable Gifting with Life Insurance allows donors to, “use pennies to give dollars”, that is, the small premium that is paid (pennies) results in a large generous gift to the Charity (dollars). The donor can make this gift without taking away assets that heirs have been promised upon the death of the donor. In fact, the donor actually if they elect, need not make it known the gift is being given. Since Life Insurance is a “self-completing will”, the gift can be pre-set with the charity years even decades in advance, and all the donor need do is continue paying the premium. Upon their death the life insurance proceeds pass quietly and without fanfare to the charity or ministry. Proceeds pass onto the charity without gift or income taxes.

There are two reasons for assigning ownership to the charity/ministry. The first is premiums become tax deductible to the insured. The second is, if someone’s estate is large enough to be concerned about Estate Taxes, then by making the charity the “owner” of the policy, it now comes out of your estate and the premiums being paid are tax deductible (Please discuss these issues with your legal and, or, tax advisor). Although there are benefits to the insured transferring ownership of a policy to the charity (see below), there are at least two reasons the insured may want to retain ownership.

The first is that the insured may want to retain ownership in case the families financial situation and circumstances change down the road and it would be better if the death benefit were to payout to the insured’s family. The second is that, and any of us that have lived long enough have witnessed this, some charities or ministries melt down, become corrupted, or just plain bad stewards of the monies entrusted to them.

By retaining ownership of the policy the insured can change the “beneficiary designation” thereby redirecting the death benefit to a more suitable charity or ministry. If the insured had “irrevocably” assigned ownership away this would now not be possible An additional benefit is that, life insurance policies, which are indeed contracts, and as such they are a particular type which can not be challenged by unhappy family heirs after the insured’s death.