Life Insurance For Charities

Author: Ivon T. Hughes

There are three ways in which a charity can benefit through the gift of life insurance. Under the "gift plan," your client makes the charity the owner and beneficiary of an existing life insurance policy on his/her life with or without; its that simple. If your client no longer requires a policy that is rich in cash value, he or she can change the ownership and beneficiary designation to the charity.

Most countries allow full deduction of the premiums but you should consult an advisor/accountant for how the rules affect you.

The second method of gifting life insurance is called a "charity ownership". Assume that a married couple gives $5000 to a specific charity each year, so over the next 10 years, they will have contributed $50,000 after tax. In this case the charity purchases the maximum possible life insurance policy on your client's life with the annual premium.

Another charitable giving technique is called the "charitable bequest" which makes the charity the beneficiary of the life insurance policy. Because you remain the owner of the policy for the rest of your life, there may be no income tax deduction as there is in the case of the two previous plans.

All three plans may clearly offer something for everyone. As in the case with every financial strategy, you should be well informed about the different options that are available so you can select strategy that will work best.