We know at Insurance Specialists, Inc., If you’re a charitable person, you may have an organization or two to keep in mind when you have something to spare at the end of the month. This charity may be your alma mater, an organization researching the cure for cancer, or a church. Whatever issue is most near and dear to your heart, you may want to ensure your charity continues to receive something every month, even after your death. There are a few ways to accomplish this, including:
- Naming the charity as a beneficiary
- Gifting dividends
- Using an optional rider
- Donating the life insurance policy
Naming the Charity a Beneficiary
One of the easiest ways to accomplish donation through your life insurance policy is to list your charity as a beneficiary. Like naming a loved one as a beneficiary, the charity you name on the policy would receive the amount of the life insurance policy upon your death. This choice is extremely flexible, because you can change your mind at any time and name a new beneficiary, or you could add an additional charity as a second recipient. If you choose this option, however, you will not receive a tax deduction, because you are still considered the owner of the insurance policy.
Gifting Dividends
If you want to claim tax deductions for your donations, you can give dividends. While it would not yield the same amount as naming the charity a beneficiary, you could still use the life insurance to donate while claiming the tax deduction. You would do this by ensuring your dividends were paid to you in cash during your life, then donate that profit to your charity.
Using an Optional Rider
Some insurance companies have begun to add optional “riders” to their policies. These could be additional benefits to existing riders, such as a terminal illness rider that yields a higher percentage upon death, they could be returns of premium riders, or they could be charitable giving riders. If your life insurance policy has a charitable giving rider, it may give an additional percentage of the total policy amount to your charity, up to a certain amount. Selecting a rider keeps the bulk of your insurance policy for your beneficiaries while also guaranteeing your charity receives a large donation.
Donating the Life Insurance Policy
Selecting this option could give your charity a larger portion of the life insurance policy while also providing you with a significant tax deduction. If you gift your policy to your charity, the charity becomes the owner of the policy, which reduces your taxable estate. The charity would also receive the maximum amount of the policy upon your death, and there is no limit on the size of the policy donated (charitable donations have no ceiling).
Whichever option you choose, make sure you have all the information you require to proceed with the donation. Call one of our Atlanta insurance administrators at (888) 451-0883 or use our online form to discuss your needs.