How You Can Donate Your Life Insurance to Charity MoneyWise
go to original July 28, 2022

Life insurance can be an important part of protecting your family and their future. There are certain instances when you may no longer require your insurance policy. Maybe your dependents have reached an age where they no longer rely on you, or your financial status has grown to a point where a life insurance policy is no longer of great use.

Instead of cancelling your policy outright, you might consider donating your life insurance policy to a charity that is important to you. Not only are you able to receive a tax benefit for your donation, but you can also know that you’re continuing to support a cause that’s important to you.

There are four ways to donate your life insurance benefit to a charity, each of which has specific implications for you, your estate and your taxes.

If you have a term-life policy – that is, a policy that covers you for a certain number of years – that you’re not going to renew, gifting the benefit can optimize the investment you’ve made over the years.

Making the charity the irrevocable owner of your policy has a lot of advantages.

The main one being that you’ll receive a tax receipt to use in the year of the donation. The amount of this receipt is based on the fair market value of your policy which refers to the current value of your policy, taking into account factors like your age and health. This is generally greater than the cash surrender value (CSV), which is the value after a surrender fee is deducted.

If you make a charity the owner of your life insurance policy, they will be responsible for paying any ongoing premiums. If you choose to continue paying the premiums yourself, you can receive a tax receipt for the payments you make.

If you’re unable to claim the entirety of the tax credit in that year, the good news is you can carry it forward for up to five years.

When the policy matures, your chosen charity will receive the full benefit of your policy.

Read the rest at Yahoo!Finance

  Learn about Banderas Bay Charities, Inc.