2 Ways to Combine Charitable Giving and Life Insurance

Financial planning can be an ongoing process as life can be ever-changing. Sometimes having a life insurance policy can be the sole manner in which to preserve household wealth, while other times in can be more efficient to combine it with charitable giving.

If you no longer need a particular life insurance policy, you can simply give it away. You may donate it outright to a certain charity, or used a Donor Advised Fund (DAF). By changing the ownership, you can be done with it and may even be able to take a charitable income tax deduction for the value of the policy at the time of the gift. But there may be an issue of ongoing premiums, which would also shift to the charity. You can either continue to pay the premiums for the charity either to the charity itself or to the insurance company, or “you could convert the policy to a reduced and paid-up policy and donate it with no ongoing premiums needed,” according to Dana Holt, CEO of HOLT Consulting.

You may also give a new life insurance policy to a charity, but the charity must have an insurable interest in the donor (you). If this is hard to manage, you could also name the charity as a beneficiary of the policy, either as a partial or full beneficiary, or to a trust that establishes the charity as the trust beneficiary to maintain more control over the funds.

See Jamie Hopkins, 2 Ways to Combine Charitable Giving and Life Insurance, Forbes, March 6, 2019.

Special thanks to Joel C. Dobris (Professor of Law, UC Davis School of Law) for bringing this article to my attention.