Do you have a favorite charity or cause that you’re passionate about? Are you looking for ways to support that charity as part of your legacy? You have a number of options available, including charitable trusts, donation of investments and outright cash gifts.
However, you might be surprised to learn that you can use your existing life insurance to give to the charity of your choice. This could be a helpful option if you want to support a favorite cause but also want to retain control of your assets in case you need them later in life.
Permanent life insurance offers a few different charitable strategies. Some allow you to make a sizable gift, while others are more modest. You also may be able to gift assets to a charity while still including your family in your legacy. Below are several different charitable giving methods to consider:
Charitable Gift Riders
Some insurance companies now offer optional charity riders. Under these riders, you designate a particular charity. Upon your death, the insurance company pays an extra death benefit amount to that organization. The extra amount is usually a modest percentage of the total death benefit.
It’s important to note that the charitable portion is additional to your total death benefit. The death benefit isn’t reduced by this charity payment. You may have to pay an extra fee for this additional rider, but that could be less costly than other charitable strategies.
If you own a whole life or universal life policy, you likely receive dividends into the policy’s cash value. Those dividends can be used to pay premiums or buy additional coverage, or they can simply accumulate.
You can also gift those dividends directly to your charity of choice. Your life insurance company can likely pay the funds directly to the organization. You can also deduct the dividend gift on your income taxes each year.
Want to offer more support than annual dividend payments? You could give the entire policy to the charity. Under this strategy, you continue to make the premium payments to the insurance company. However, the charity takes over ownership of the policy. When you pass away, the charity receives the full death benefit.
You can deduct any future premium payments from your taxes. However, it’s important to remember that this type of gift is usually nonrevocable. If you change your mind later, you can’t reverse the gift.
This may be the simplest way to use your life insurance to support a charity. You simply name the charity as a beneficiary on the policy. The charity receives its appropriate share of the death benefit just like any other beneficiary.
There are a few reasons why this may be a better option than simply gifting the policy. The first is that it’s revocable. If you change your mind later, you can simply take the charity off the policy. You can also split the death benefit between the charity and your family so everyone is included. Finally, you retain ownership of the policy, allowing you to tap into the cash value should you need it in the future.
Ready to develop your charitable giving strategy? Let’s talk about it. Contact us today at Carstens Financial Group. We can help you analyze your needs and implement a plan. Let’s connect soon and start the conversation.
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17108 - 2017/10/30
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