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Donations through a life insurance policy
Did you know that a charitable organization can be named the beneficiary of an insurance policy during your lifetime or upon your death? This is a simple and flexible way to make a substantial donation to a worthy cause, with a fairly modest investment.
The terms you choose for the donation through a life insurance policy will depend on your financial and philanthropic objectives, age and marital status. If you are donating to get a tax deduction, be sure to name the charity as both the beneficiary and the owner of the policy. If you name it as one or the other, you will not be able to deduct the donation proceeds from your taxes. The rule of thumb is if you donate a term life insurance policy, you can deduct the premium from your taxes, where as if you donate a whole life insurance policy, you can deduct the cost of the premiums and the cash value from your taxes.
A donation through an insurance policy generates significant tax savings for the donor. Because the donation is made in one’s lifetime, the estate receives no tax benefit.
However, if you believe that your estate is likely be taxed heavily, you may wish to defer your tax savings by designating the MHI Foundation as your policy’s beneficiary, in part or in whole, while you remain the owner. The donation will take place only upon your death, thereby generating tax savings for the estate.