Gifts of Life Insurance
When you first took out a life insurance policy, you aimed to provide for the financial security of your family in the event you or your spouse died. Chances are good you now have far different needs.
If you may own an insurance policy that has a substantial cash surrender value, it can be used for worthy philanthropic purposes.
To make a gift with a paid-up policy, you earn a tax deduction that is equal to the cost of replacing the coverage with a comparable policy. The deduction cannot be greater than your net investment in the policy (total premiums paid less any dividends received). The charitable deduction is reduced by any outstanding balance of a policy loan, which may also be considered additional taxable income.
To qualify for the federal charitable deduction on a gift of an existing policy, you must be sure to name The Servants of Mary as owner and beneficiary.
If premiums on the policy are still payable, there are two options:
1. You may assign ownership of the policy at its current value as the total charitable gift, immediately available for our use. In this case, we might surrender the policy for cash, or
2. We might decide to accept an amount of paid-up insurance. In either case, you are relieved of the obligation to make further premium payments.
Use of Beneficiary Clause as a Revocable Gift Arrangement
The easiest way to use life insurance for charitable giving is to simply name us as the beneficiary of a policy. Such options are available if you would rather retain ownership of a policy as an asset for your own financial security or that of others. They include:
1.Naming the Servants of Mary as the only beneficiary or as a partial primary beneficiary of the policy, while you keep the right to change the beneficiary clause as owner of the policy;
2. Naming us as the contingent successor beneficiary, receiving the death benefits only if a named individual beneficiary predeceases you;
3. Creating a separate trust named to receive death benefits, with trust terms providing first for financial support of one or more named individuals for specific terms of years or for life, after which the trust terminates and its assets pass to us;
4. Naming the Servants of Mary as the residual beneficiary of an annuity settlement option available under some policies.
There are no current tax benefits to this arrangement because you are not transferring the policy ownership; however, it provides a very generous gift with attractive tax benefits upon your death.
For additional information on gifts of life insurance, please contact Fr. Lawrence Choate at 800-778-4400.