Gifts of Life Insurance
Life insurance provides an excellent vehicle for donors to establish a significant fund that benefits the community at a relatively small cost. By assigning a life insurance policy to the CFGC, you can support the causes you believe in.
Individuals purchase life insurance when they need protection either for their family, business or estate. Later in life, donors may find they do not need as much insurance because they have built an estate of other assets and /or their children are self-supporting. As a result, it may be desirable to use the insurance policies to make a charitable gift.
Benefits of Giving Life Insurance
Donors receive a federal income tax deduction for the amount of the cash surrender value in the year of the irrevocable transfer of the policy to the Community Foundation.
Life insurance enables donors to make a large gift without significantly reducing their current stream of income.
It is as simple as purchasing a life insurance policy, vesting all ownership rights to the Community Foundation (CFGC) and irrevocably naming the foundation as beneficiary. Each year the annual premiums paid is fully deductible as a charitable contribution. Upon the donor's death the proceeds of the policy go to the foundation free of estate taxes.
Life insurance is an excellent way to establish a community fund to support a special charity or cause of interest to the donor.
An Example
Paid Life Policy:
Mr. Wilson purchased a $50,000 whole life policy to guarantee funds
for his children's education. His children have graduated and are
now financially independent, yet Mr. Wilson still owns the policy
and pays the $1000 annual premium. The policy's cash surrender value
is $22,000. Mr. Wilson assigned the policy to the CFGC, he continues
to pay the $1,000 annual premium and receives a tax deduction for
both the initial gift and the annual gift.
A donor may not be ready to transfer ownership of the life insurance because he or she may want access to the cash value, or may need the policy as collateral. Instead of assigning the policy to the Foundation, there is the option of naming the CFGC as beneficiary.
By naming the CFGC as beneficiary, the donor retains ownership of the policy and has access to the cash value as well as the right to change the beneficiary. Since ownership of the policy is retained, there is no charitable deduction for the value of the policy upon designation of the charitable organization as beneficiary or for subsequent premium payment. However, any proceeds payable to the CFGC at death will not be subject to federal estate tax.
