Eliminate premium payments on an unneeded life insurance policy by supporting your favorite charity. You may receive a charitable income tax deduction.
Charitable gifts of life insurance are one popular method of legacy giving that allows many donors to give more to their favorite cause than possible with a cash gift. Donating your life insurance to charity may also provide valuable tax benefits to the donor. These potential tax advantages depend on the method an individual uses to donate their life insurance policy to charity.
Insuring A Better World Fund’s innovative approach to charitable gifts of life insurance allows donors the opportunity to take full advantage of charitable tax benefits. Upon donation, ownership of the policy is transferred to Insuring A Better World, a 501(c)3 not-for-profit organization and donors may receive a charitable income tax deduction*.
*Please note that we are not tax advisors and cannot give tax advice. Please consult with your tax professional for your specific circumstance.
Traditionally, there have been three ways to donate a life insurance policy to charity:
If the policy is “paid up” i.e. no more scheduled premiums, then the charity receives the death benefit amount upon the donor’s death. If the life insurance policy donated requires additional premium, the donor agrees to pay the cost of the premium in the form of annual tax-deductible gifts to the charity. The charity acts as a conduit and pays the premium to the life insurance company. Unfortunately, these types of donations often lapse when the donor stops paying premium due to the financial burden of increased unplanned premium. Due to the prolonged low interest rate environment, required increased premium from the donor is quite common today.
If the donor refuses to pay the increased premium, the gift to the charity lapses without the charity receiving any benefit, clearly a bad unintended outcome.
This method requires an “insurable interest” that can be demonstrated to the insurance company (usually board members or a history of giving by the insured). Similarly, the donor will pay the cost of the premium in the form of annual tax-deductible gifts to the charity. The charity acts as a conduit and pays the premium to the life insurance company. Unfortunately, the same financial burden to the donor applies and these donations may lapse without paying a death benefit to charity, a bad unintended outcome.
This option allows donors the right to change the beneficiary at any point and the donor determines the portion of the death benefit for charity. However, the income tax benefits for charitable giving do not apply because the ownership of the policy is not transferred to a charitable organization.
Insuring A Better World Fund offers advantageous tax benefits: a potential income tax deduction. Unlike the methods above, Insuring A Better World Fund eliminates all costs for donors and their chosen charities. We pay all costs after donation. Charities can be confident that the policy will not lapse due to the financial strain on donors and donors are relieved of an unneeded policy while still receiving the opportunity to gain a charitable tax deduction from the transfer of ownership.
Our donation process is simple and costs nothing. Submit your policy for review using the form below and our team will reach out to you within two business days to start the qualification process.
Visit our charitable gifts of life insurance page to learn more about how Insuring A Better World Fund determines which policies are eligible for donation.