– Life Insurance
MAKING A CHARITABLE GIFT WITH A LIFE INSURANCE POLICY
- You can give a gift of an existing life insurance policy and make the Community Foundation the owner of the policy and the irrevocable beneficiary.
Benefits to You:
- You get a Federal income tax deduction for the gift
- If the policy is paid-up (no premiums remain to be paid), your deduction equals the replacement value (or basis, if lower).
- If premiums remain to be paid, the deduction equals the “interpolated terminal reserve value,” i.e., the amount approximately equal to the cash surrender value of the policy. Note: If you continue to pay premiums, you can also deduct the premium payments.
- Giving an irrevocable life insurance policy to the Community Foundation will get the value of that policy out of your estate and possible save you on estate taxes later on.
- You can also use life insurance as an asset-replacement device – to replace the value of a charitable gift in your estate and provide for your heirs later on.
This is How it Works:
You make a major gift to the Community Foundation. Later on, your heirs purchase a life insurance policy on your life, in an amount equal to the value of the charitable gift, naming themselves as beneficiaries of the policy. You then make tax-free gifts to your heirs (up to $13,000 per year, per donee), using the tax savings from the charitable gift, so that your heirs can pay the insurance premiums on the policy.
Benefits to You:
- You make a major gift to charity and achieve tax savings.
- Your heirs receive the same economic benefit (through life insurance) that they would have received (through your estate) if the charitable gift had not been made.
- Under the right circumstances, this plan can provide substantial benefits for you and your family, as well as a major gift to charity – a win/win situation for everyone.
