Why Gifting Life Insurance Makes “Cents”

When most of us buy life insurance, we’re ensuring that our families are taken care of after we’re gone. Gifting life insurance by setting up a policy or donating an existing policy is a smart way to make a charitable gift that benefits you and charities like the Bethesda Health Group Foundation.

The Benefits of Gifting Life Insurance

Significant Tax-Free Contributions

A policy gift to charitable organizations can be extremely powerful. Policy gifts allow people to make significant tax-free contributions at death based on a much smaller stream of annual cash gifts during life. In addition, everything is tax deductible:

• If you own a “cash value” or “paid-up” policy and donate it to a charity, a portion of the existing cash value will qualify for a charitable tax deduction.
• As you continue to pay the premiums via cash gifts to that organization (if the policy is not already paid-up), those cash gifts are also tax-deductible.
• The death proceeds from insurance received by a charity are free of federal income and estate taxes, probate, administrative costs. In addition, there are no delays, fees, or transfer costs.

The gift of life insurance policy not only improves your legacy, but policy gift proceeds will add great financial strength to a charity’s ongoing mission.

Simplifying Your Estate Plan

A gift of life insurance can “clean up” your estate plan by eliminating the need for a charitable clause in your will or living trust. While charitable wishes in normal planning documents require the liquidation of private company stock or real estate during the estate settlement, gifting life insurance automatically fulfills your charitable intention separately and causes no disruption to the flow of the rest of your estate. By not harming your estate plan, your loved ones will be better accounted for.

How to Make a Gift of Life Insurance

Donate a Paid-Up Policy

You may make a gift by irrevocably transferring the ownership of the paid-up policy to your favorite charity.

Designate the charity as Beneficiary

If you would like to retain ownership of your life insurance policy you can designate a charitable organization as the beneficiary.

Donate an Existing Policy Where Premiums Are Currently Being Paid

You can irrevocably assign ownership of the policy to your favorite charity. Many charities continue paying premiums on the policy if annual tax-deducted gifts are equal to the amount of the premiums.

Donate a New Policy

You may give the gift of life insurance by taking out a new policy by naming the charity as the owner at the time the policy is issued. If you use a gift of cash to purchase the policy, subsequent tax-deductible gifts could be made to the charitable organization in order to keep the policy active.

Example: Jim Alwood, age 79

Jim Alwood served in the Korean War and has a $10,000 life insurance policy that he purchased in the 1950’s from Serviceman’s General Life Insurance. Today, that policy has a cash value of $18,000. Joe has decided to donate that policy and will receive a tax deduction for the cash value ($18,000) of the policy.

For legal or tax advice, please consult a tax professional.

For more information on how you can make your gift of life insurance to Bethesda, please contact Pam Dempski at the Bethesda Health Group Foundation, by calling 314-800-1981 or email pedempski@BethesdaHealth.org