Millions of Americans give their financial support to charitable organizations every year. In addition to donating to good causes during their lifetimes, there are ways for the philanthropic to continue to help a charity of choice, even after death. In fact, any type of life insurance can be altered or designed with this in mind.
Using Life Insurance as a Charitable Gift
One of the simplest ways is to ‘gift’ a life insurance policy. Doing so will mean that the charity receives the total amount of the policy proceeds upon the death of the holder, and further advantages are that it will substantially reduce estates taxes and income taxes. So the not-for-profit organization receives the full benefit of the policy.
Making the life insurance policy a gift will only cost slightly more for the holder (and the additional premium amount can be partly claimed back in tax over the ensuing years). Gifting a policy may be a good way of disbursing monies from a redundant life insurance policy; where the finance which was required and planned for when the policy was taken out is no longer needed.
Take out a Rider on a Life Insurance Plan
If, on the other hand, a donor does not intend for a charity to receive all of the proceeds of a policy (i.e. the donor wishes to make a smaller gift), then there is a relatively new way to do so using life insurance: Taking out a rider on the policy. The great thing about using a rider is that there is no additional cost to the policy holder for doing so, and it negates the necessity of having to organise and administer any additional separate trusts.
A look at the rate of giving compared to the performance of the S&P 500, a comic stock market indicator. Americans becoming increasingly giving, even when economic woes hit their wallet. Life Insurance can be an excellent gift to a worthy cause.
Restrictions of Charitable Life Insurance Riders
If taking out a rider there are a couple of restrictions: Firstly the charity has to be one recognized by the IFS as being a non-profit making organization, and secondly there may be an upper limit on how much can be given as a gift.
Whichever way is chosen, deciding to make a life insurance policy ‘charity friendly’ will ensure that a person can continue to show support to a cause which is close to their heart, even after their death.
photo credit: blueoxen