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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 extate. |
| 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 extate. |
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 comparitively
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.
DISCLAIMER
The information contained in this site 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.
For
More Information Contact
Gift and Estate Planning
Services
P.O. Box 151191
Jackson, MS 39210-1191
(voice) 601-974-1035 (fax) 601-974-1088
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