Want Your Life Insurance Policy to Help a Cause? Donate Proceeds to a Charity!

Charities epitomize what is good in society, through selfless acts that aid in making the world a better place to live in. A charity may have benefited you or simply have a mission that you identify with, and it is therefore natural to want to lend your support to the cause.

Donating your life insurance benefits to a charity can ensure you are able to pass on a helping hand that will also cement your legacy after death. Permanent insurance for life is better suited for leaving to charities, since these policies do not expire over time (as opposed to term life insurance).

What to Consider while Planning Life Insurance Donations to Charity

When you’re looking to leave your life insurance policy to charity, there are a few special aspects you should consider, like:

Giving to charity through your will

You can leave your policy to a charity of your choice through your will. In this, your estate will be afforded 100% tax credit equal in worth to your net income at the time of your death. This will give the charity a share of the proceeds from your estate with a tax-deductible advantage, ensuring it receives a substantial amount as your donation.

Naming the charity as the beneficiary

There are two orientations for this process. The first one involves transferring ownership and control of the policy to a charity, whereby any premiums paid from the time of transfer are done through the charity (which qualifies the policy for tax deductions).

The second orientation is where a donor maintains access, control and ownership of the policy while still alive. This gives them the opportunity to change the beneficiary or simply alter the portion that the charity will benefit from.

Structured policy donation

Policy donation is a process which ensures the charity of your choice is able to receive the total value of your estate in its entirety. The whole policy is given to the charity and the important aspect with this is that there is no preset limit to the size of the insurance policy that you can leave to them.

Giving through policy dividends

You can choose to give to your preferred charity through policy dividends, whereby the dividends that you receive as a policy holder are directed to the charity of your choice. There are no additional costs or cash outlays from you as the donor, and the charity is able to receive your support indefinitely, at your discretion.

Bigger donations through a tax-free pathway

Tax deductible benefits in documented life insurance types is normally equivalent to the cash value of the policy, including any premiums paid after the donation has been structured. You can therefore make bigger donations in a tax-free way by transferring its ownership to the beneficiary, for the policy to be eligible for tax deductions.

Riders in charitable giving

Riders make up a large part of the life insurance needs and specifications that are attached to a policy and help guide its benefits. Certain riders are typically attached to policies worth over $1 million and facilitate payouts worth 1-2% to charities. These do not increase premiums and ensure you designate the exact amount for charity.

Naming a charity as a beneficiary can enable you give towards a good cause, in a tax-free manner. At LifeCentra, our experts offer professional insurance consultation, especially when you need help deciding which policy is best for you, so get in touch with us to discuss your insurance needs today!