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Gift of Life Insurance

 

A gift of a Life Insurance policy is a gift arrangement whereby a charity is given ownership of a new or existing life insurance policy, or is made the beneficiary of a new or existing life insurance policy.

How does it work?
It depends on whether a new or existing policy is given, and whether or not the charity becomes the owner of the policy or simply the beneficiary.

Method

What Happens

Tax Effects

Gift Existing Policy

Full rights of ownership are assigned to the charity. Donor makes annual gifts to the charity sufficient to cover premium payments.

Donor receives income tax deduction for net cash value; annual gifts to charity are deductible; death proceeds excluded from taxable estate.

Gift New Policy

Donor applies for new policy and upon insurance, transfers ownership to the charity. Donor makes annual gifts to the charity sufficient to cover premium payments.

Donor receives income tax deduction for annual gifts to charity; death proceeds excluded from taxable estate.

Charity as Beneficiary Only

Donor names the charity as beneficiary of the policy. For existing policies, a form from the company is required to do this. Donor pays premiums to company.

No current income tax deduction since donor owns the policy; death proceeds are excluded from taxable estate.

What are the benefits?

  • Large Gift for Low Cost: Aside from the tax benefits mentioned above, a gift of life insurance is a cost effective way of making a large future gift with comparatively small costs.
  • Great for Younger Donors: Many young, high-income earners would like to make a large gift from their assets, but are still building wealth through savings and investment. Life insurance gifts are a cost-effective way for those 50 and younger to make a significant future gift to charity, while reducing current income taxes.

For more information contact:
Gift and Estate Planning Services
Millsaps College
P.O. Box 151191
Jackson, MS 39210-1191
(voice) 601-974-1035  (fax) 601-974-1088

DISCLAIMER: The information contained on this page is for educational purposes only.  The reader understands that Millsaps College is not rendering legal advice and that the reader should seek independent legal counsel when contemplating estate planning decisions.