Charitable Planning

Life Insurance & Charitable Giving

Life insurance can be an excellent tool for charitable giving. Not only does life insurance allow you to make a substantial gift to charity at relatively little cost to you, but you may also benefit from tax rules that apply to gifts of life insurance.

The Marc S. Byrnes Foster Care and Adoption Wing at Bellefaire JCB
The Marc S. Byrnes Foster Care and Adoption Wing at Bellefaire JCB

Why use life insurance for charitable giving?

Life insurance allows you to make a much larger gift to charity than you might otherwise be able to afford. Although the cost to you (your premiums) is relatively small, the amount the charity will receive (the death benefit) can be quite substantial. As long as you continue to pay the premiums on the life insurance policy, the charity is guaranteed to receive the proceeds of the policy when you die. Since life insurance proceeds paid to a charity are not subject to income and estate taxes, probate costs, and other expenses, the charity can count on receiving 100 percent of your gift.

Potential Tax Benefits

Depending on how you structure your gift, you may be able to take an income tax deduction equal to your basis in the policy or its fair market value (FMV). You may also be able to deduct the premiums you pay for the policy on your annual income tax return.


A 50-year old couple committed to giving $12,000 annually for 10 years could leverage the $120,000 gift into a $1,000,000 gift payable at the second death. (Assumes 50-year olds are both preferred non-smokers).  When you factor in the charitable tax deduction on the premium, the internal rate of return at joint life expectancy is between 10% and 11%.

If you are currently making annual gifts, have deferred pledges, or are planning on making a large one-time gift, you should consider Life Insurance as a tool to enhance and guarantee the ultimate benefits to your favorite charity.

Contact an advisor today to learn more.

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