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Gifts of Life Insurance

There are several ways you can use life insurance as the basis for a charitable gift.

Making the Charity a Beneficiary of your Life Insurance Policy
You may wish to make the charity the beneficiary (or a contingent beneficiary) of a life insurance policy as a way to make a sizeable future gift. You retain lifetime ownership of the policy, keeping the right to cash it in, borrow against it, and change the beneficiary. A gift of this nature is treated much like a bequest made through your will. Because you retain the ownership of your asset (the policy), you will not receive an income tax charitable deduction for this future gift or for your premium payments during your lifetime. The policy's proceeds will be included in your gross estate, and your estate can take an estate tax charitable deduction.

You may wish to transfer ownership of a policy to the charity, or purchase a new policy with the charity as owner and beneficiary. If you make a charity the owner and beneficiary of a policy, you are entitled to certain tax advantages.

How does it work? A donor takes out a life insurance policy on himself or herself and makes the College of Saint Benedict the owner and recipient of the policy. The donor makes an annual contribution to CSB and in turn, when the premium comes due, CSB pays the premium. The donor's annual contribution is tax deductible as a gift to St. Ben's.

Wealth Replacement Using Life Insurance
A donor may make a current gift to charity and receive a charitable tax deduction. At the same time, the donor may purchase life insurance to replace the donated amount or perhaps, the amount after estate tax that the beneficiaries would have received. Depending on the circumstances, the charitable tax savings and any life income resulting from the gift may defray the cost of the wealth replacement insurance premiums.

As with all matters concerning estate planning, please consult your estate and tax specialists. Click to return to Wills and Bequests or to the Planned Giving Home Page.