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Charitable Giving Through Life Insurance
Most people could not write a check today for $100,000 to their chosen charity. But through life insurance, it can cost you very little to be generous. Life insurance enables you to make a substantial future gift by making small premium payments over time.

The advantages of using life insurance as the instrument to fund a charitable giving plan include:

  • You may qualify for income, gift and estate tax deductions through charitable giving.
  • The gift is given without disrupting other assets reserved for your family.
  • Death benefits are paid promptly to the charity.
  • Gifts of life insurance do not increase estate liquidity needs.
  • The policy's growing cash value also may be borrowed by the charitable institution for special needs.

    The federal government has structured income, gift and estate tax laws to encourage you to share your assets with charitable organizations. The tax benefits you may receive include:

  • Lower income taxes
  • Lower gift taxes
  • Lower estate taxes There are many creative ways to make charitable donations through life insurance. One of the simplest is to name a charitable beneficiary to receive all or a portion of the proceeds of a policy you already own. You may also purchase a new policy, naming a favorite charity as beneficiary. In either case, you own the policy and you pay premiums. You can't deduct premium payments, but you maintain control of the policy (should you decide to change the beneficiary at some point).

    Another very simple way tomake a charitable gift through life insurance is to donate policy dividends* from cash values to a favorite charity. Another option is to make cash donations to the charity for the purpose of purchasing life insurance. This provides you with a current income tax deduction while the charity pays the premiums and maintains ownership of the policy.

    If you have more sophisticated estate planning needs, charitable giving may be a necessary and valuable component of a comprehensive estate plan. In this case, life insurance in combination with various estate planning instruments can provide you with current income tax deductions and may generate income for you and your family.

    If you are interested in making a charitable gift through life insurance, or if yoiu have complicated estate planning needs, consult with your insurance representative and tax advisor or attorney for further information. No matter how you look at it, charitable giving through life insurance is a win-win situation. Your generous support of charitable organizations will help fulfill their missions while providing you with financial benefits.

    *Dividends are not guaranteed.
    Copyright 1998 Principal Mutual Life Insurance Company

    Contributed by: John Lechuga