It’s the giving season. Are you planning to make a donation to your favorite charity this holiday season? If so, you have company. More than 60% of Americans make some type of charitable donation in the last two weeks of the year. The post popular charities are churches, organizations that serve the poor, and children’s charities.1
Regardless of what charity you choose to support, the end of the year is a perfect time to make a donation. You help your favorite charity build their financial reserves for the upcoming year and you may even be able to realize a tax deduction.
A cash donation may seem like the obvious way to support your charity, but it’s not your only option. You can also use life insurance to make a donation. If you have a life insurance policy you no longer need or if you are in the market for life insurance, below are a few ways you can use your policy to help the charity of your choice:
Name the charity as a beneficiary.
One of the easiest ways to use life insurance to support a charity is to name the charity as a beneficiary on the policy. You can name them the sole beneficiary or partial beneficiary. You simply fill out a beneficiary change form with your carrier. When you pass away, the charity files their beneficiary claim and receives their share of the death benefit.
This type of donation can be advantageous because it’s convenient and because it doesn’t require a cash donation today. The charity doesn’t receive the money until some point in the future when you pass away. Just be sure to let the charity know that you have named them as a beneficiary. If you don’t, they may not know that they need to file a beneficiary claim upon your passing.
Transfer the policy to the charity.
You can also transfer ownership of the policy to the charity. In this instance, the charity becomes the new policy owner and usually, the new beneficiary as well. They receive the death benefit when you pass away, but they also assume full control of the policy.
For example, the charity controls the cash value. They can withdraw cash from the policy or even take dividends or interest as distributions. They can change the beneficiaries on the policy. They can even surrender the policy and take the cash value as a distribution if they want.
If you don’t want to relinquish all control of the policy to the charity, this probably isn’t a good option. However, if you truly don’t have any use for the policy, you may want to consider it. You may even be able to deduct the value of your paid premiums and all future premiums.
Use a charitable rider.
Some life insurance companies offer a charitable rider. This is an optional feature in which the insurance company automatically pays a small portion of the death benefit to the charity of your choice upon your death. In many cases, these riders have no cost.
This could be a good option if you want to leave a modest amount to a charity. The charity isn’t named as a beneficiary, so your other beneficiaries may not even know that the charity was included in your death benefit. You also don’t have to worry about the charity forgetting to file a claim. The insurer automatically makes the donation.
Donate your interest or dividends.
If you have a permanent life insurance policy, you may receive annual payments from the insurer. On whole life policies, these payments come in the form of dividends. On universal life policies, the payments are interest.
You can donate your annual interest or dividends to the charity of your choice. They can then use those funds as they see fit. You may even be able to deduct the donation from your taxes.
Ready to review your life insurance strategy? Let’s talk about it. Contact us today at Northern Plains Insurance & Financial. We can help you review your protection and find the right plan for your needs. Let’s connect soon and start the conversation.
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19505 - 2019/11/21