Charitable Donations with Life InsuranceLife Events
You took a smart step toward providing financial security for your family when you purchased life insurance. But did you know that you can use that same life insurance policy to help a cause near and dear to your heart?
According to the nonprofit organization Life Happens, over 95% of U.S. households donate nearly $3,000 (on average) to charities each year.
If you wish you could give more, but don’t think you have the resources, some experts suggest taking a look at your life insurance policy.
Making a charitable gift through your life insurance can be a win-win for you and your favorite charity. With wise legacy planning, it’s possible to not only stretch your donation dollars and establish a legacy or endowment that lasts, but also benefit from some tax breaks too.
“People may need guidance to merge their financial planning or retirement strategies with philanthropic goals to maximize the impact,” says Tom Robb, Director of Advanced Markets for Farmers New World Life Insurance Company “Your life insurance professional is a good place to start.”
2 Ways to Gift Life Insurance
1. Name a charity as a beneficiary
Whether it’s your church, school, or local shelter, you can make a significant impact on an organization you care about, by naming the charity as a beneficiary in your life insurance policy. Like any beneficiary, the charity will receive the proceeds of your policy upon your death. And while you don’t receive an income tax deduction, your taxable estate is reduced.
2. Donate a life insurance policy
You can also choose to donate full ownership of a life insurance policy to a charity. This type of donation lets you give a monetary gift far beyond your budget. You simply contribute a modest annual premium on the policy that can eventually lead to a considerable payout to the charity after your death. As a reward, you receive tax deductions because the charity owns the policy.
Small Investments Now Can Lead to Big Donations Later
“You can name the charity as a beneficiary on your policy.” says Robb. “Or you can turn the donation you’re already making into something with real impact. Leverage your donation by giving dollars for premiums today that can become a much larger gift later upon your death.”
For example, a supporter of a charity may make a $1,000 donation to an organization each year with the intent for the charity to buy a $100,000 policy insuring the life of the supporter. The individual may then receive a $1,000 income deduction for the gift, while the charity ultimately receives a $100,000 payout at the time of the person’s death.
In addition to these options, there are other ways to structure your life insurance gift to meet your unique financial and philanthropic goals. Consider working with your Farmers agent to discuss your life insurance needs. A smart legacy giving plan furthers your long-term financial strategies, while helping you make ample donations to groups you care about…and that’s a legacy you can be proud of.
Life insurance, annuities and accidental death insurance issued by Farmers New World Life Insurance Company, 3003 77th Ave. SE, Mercer Island, WA 98040.