A Gift of Life Insurance
With a gift of life insurance, you have several options for making a substantial, cost-effective gift.
OPTION 1—a charitable beneficiary designation
You may find that naming Citizens & Scholars as the beneficiary of your life insurance policy is a comfortable, powerful way to make a future gift that costs nothing today and gives you the flexibility to make changes if your needs or goals change. You can name us as the:
- Primary beneficiary
- Percentage beneficiary, along with one or more heirs or other charitable beneficiaries
- Contingent beneficiary, to receive the proceeds only if the primary beneficiary cannot
OPTION 2—make a tax-efficient gift of a policy
You may find that you own a life insurance policy you no longer need for its original purpose. Perhaps you bought it to pay off the mortgage or cover college tuition expenses, but now your home is paid off, and your children are grown. In this case, you may wish to make an immediate gift of your policy.
- A paid-up policy. This is an easy gift to make. In many cases, the after-tax cost of this generous gift is only a fraction of the benefit we receive, and the gift qualifies for a charitable deduction (if you itemize) equal to the policy’s replacement value or your basis in the policy, whichever is less.
- A policy that is not yet paid up. Whether this is a gift of an existing policy or you plan to purchase a policy and transfer ownership to us, you could make annual gifts to us to pay the premiums (of course, those annual gifts would be tax deductible). Or we could surrender the policy for cash.
OPTION 3—give a policy, receive an income
You may find that transferring a policy into a charitable remainder trust (CRT) provides many tax and financial benefits. The trust will pay an income to your beneficiaries for life. When the trust beneficiary dies, the remaining trust assets pass directly to Citizens & Scholars. You receive an immediate income tax deduction when you establish the trust for the present value of our remainder interest. Read more about CRTs.
Evaluate the fit.
A gift of life insurance may be a particularly good option to consider if you:
- Want to make a substantial gift with a modest after-tax cost and no out-of-pocket expense
- Want the ability to change your gift if your circumstances or goals change
- Bought a life insurance policy to cover expenses that are no longer an issue
- Would like both an income tax deduction and a future income stream
See how it works.
Don bought a life insurance policy when his children were young to protect his family while the children were growing up and ensure that his wife could pay off the mortgage on their house. After many years, he realized the children were grown and successful, and the mortgage was paid off. Don decided to use the policy to meet his charitable goals. With a simple Change of Beneficiary form, he made his wife a 50% beneficiary and Citizens & Scholars a 50% beneficiary. A decade later, after Don’s wife passed away, he had a year in which he could use an income tax deduction to offset some of his unexpected taxable income. He decided to simply make an outright gift of the paid-up policy to Citizens & Scholars.
Consider your timing.
An outright gift of a life insurance policy must be completed by December 31 to qualify for a tax deduction this year. Because no charitable deduction is available for a beneficiary designation, you can create or change that type of gift at any time that works for you.
We can help.
We are happy to discuss various options for using a life insurance policy to make a charitable gift. If you are interested in a more complex strategy using life insurance—a strategy that allows you to make a gift of appreciated assets now, receive tax benefits, and “replace” those donated assets for your heirs using life insurance proceeds—please ask us for information about a wealth replacement arrangement. In addition, if you have already named us as the beneficiary of a life insurance policy, please let us know.
We appreciate you including us in your planning.
Using a beneficiary designation to make a gift to Citizens & Scholars qualifies you for membership in the Fellows Legacy Society. This is our way to thank you for supporting our future as your plan for yours. Read more about the Fellows Legacy Society.