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How
Can You Make a Small Gift Become HUGE?
Leaving
a Legacy through Life Insurance
Within the hearts of many people is a strong desire to make a
difference in the lives of others. But
how do we ensure that these desires take root?
How can we make sure that those things most important to us are
nourished through our work, our volunteerism and through the financial
gifts we leave behind?
One great tool for leaving a financial legacy is life insurance.
Life insurance offers a practical, affordable and flexible means of
passing money to charitable organizations and causes.
Whether you have modest or substantial assets, life insurance can
be used to leave a significant financial legacy, providing gift givers the
ability to retain a high level of control over their gifts or receive
considerable tax benefits.
The simplest and most common way of leaving a charitable gift
through life insurance is by naming a charity as the beneficiary of your
life insurance contract. You
can name the charity as your primary beneficiary, which then receives the
contract’s death benefit. If you name it as your successor or secondary
beneficiary, the charity receives the death benefit ONLY if your primary
beneficiary predeceases you. If
you name it as a partial beneficiary, the charity receives a specific
dollar amount or percentage of the contract’s death benefit. Weigh these options carefully.
Life insurance benefits are paid out ONLY at the time of your
death.
Retaining ownership of the life insurance contract rather than
having the charity own it gives you full legal control over the contract.
This enables you to change the beneficiary at any time for any
reason. By continuing to control the contract, you can also borrow
against the contract’s cash surrender value if a need for emergency
funds comes up. Changing the
beneficiary designation to that of your favorite institution, cause or
charity does not necessarily provide you with additional tax advantages,
however.
Another option is to name the charitable organization as owner and
100 percent beneficiary of the contract.
Upon transfer of ownership, you as the donor continue to pay all
premiums. This gift may allow
you to receive a current income tax deduction equal to the lesser of your
cost basis (the premiums you’ve paid) or the fair market value of the
contract (roughly equal to the cash surrender value).
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