Charitable giving in the form of cash and property donations is a favorite pastime of people living in first world countries, with millions of offerings being made each year to thousands of foundations representing different causes. For those who are covered by a life insurance policy, the ability to give to worthy causes extends even after death thanks to the many ways that charitable foundations can become a partial beneficiary of an insurance policy.
If you’d like your passing to be marked by bringing a smile to the face of someone else in need, read on to learn more about using life insurance for charitable giving:
1. Policy Donations
Because it also has the ability to reduce the taxable estate of the donor, a policy donation is one of the most popular choices when it comes to charitable giving via life insurance. A policy donation also offers the benefit of yielding a current income tax deduction of the policy’s fair market value, often providing a significant savings for the donor’s estate.
From the charity’s point of view, a policy donation is the most beneficial. The charitable recipient will receive the entire face value of the the policy when the donor passes away, with the premiums paid by the donor representing only a very small fraction of the total amount received; any premiums paid after the date of the gift are also deductible.
Finally, because charitable foundations have no ceiling when it comes to estate tax, there is also no ceiling on the size of a donated policy.
2. Naming a Charity as a Beneficiary
If you’re looking for a quick and simple method of leaving a piece of your life insurance policy to a charitable foundation, consider naming a charity of your choosing as a single beneficiary of your policy. While easier to set up, this form of giving does not offer the tax benefits available with policy donations and the donor’s estate is reduced by the amount of the death benefit.
An additional benefit of naming a charity as a beneficiary is that your donation will remain completely anonymous, a useful feature when keeping the details of your estate and policy private is important to you.
3. Gifting Policy Dividends
While gifting the dividends of your life insurance policy cannot offer the same potential windfall to the charity as can using the methods above, it is possible to easily setup your policy to direct the dividends paid to your life insurance policy directly to a charity. This method requires no additional monetary outlay from the donating party, making it particularly useful to corporate entities looking to reduce taxes while giving back to their communities.
4. Charitable Giving Riders
An option only presented in modern life insurance policies over the past few years, charitable giving riders offer a simple way for a policyholder to leave the additional payout of their policy to charity. This type of rider can be attached to any life insurance policy with a face value of $1 million or more, paying out an additional 1-2.5 percent of that value to a charity of your choice.
Typically offered by life insurance companies at no extra cost and not affecting the premium or cash value of the death benefit to the beneficiaries, a charitable giving rider is quickly becoming one of the most popular options for giving to charity through life insurance policies.
Conclusion
Charitable giving is a wonderful act of kindness, no matter the platform used to deliver it, and the increasingly easy to implement options offered by insurance companies are making it more and more simple for anyone to leave a positive legacy associated with their estate. With the number of options available and the potential impact on the value of the policy used minimal or even non-existent, every life insurance policyholder can consider allowing a charity to benefit from their estate.
Jessy is the charity blogger for autoinsurancequotes.net. Jessy is also tweeting as @jesytroy
