Most of us think of life insurance as an asset for our heirs, which it can be on a very efficient basis. However, it is increasingly being used as a tool in the planning of charitable gifts.

 

This trend is based, in part, on improved forms of life insurance that work well in conjunction with philanthropic options. The use of life insurance, with charitable organizations the recipients of death benefits, has been practiced for many years.

Practical advantages include prompt, confidential transfers outside of the probate process, and the relatively simple, cost-free procedures for naming us as a beneficiary or assigning ownership of a policy to Imago Dei MCC.

The owner of a life insurance policy with cash surrender value may find that the original purpose for the protection no longer applies. It may have been purchased to provide financial security for a spouse now deceased, to educate children now grown and self-sufficient or to furnish liquidity for estate taxes since reduced or otherwise avoided.

In such instances, one option simply is to name Imago Dei MCC as the primary beneficiary under the contract. This is a revocable arrangement for a future gift, not deductible for income tax purposes.

 

As an alternative, the cash value can be a hidden asset, readily available to make a current charitable gift. When you name us as the beneficiary of a policy under which you are insured, and also assign all incidents of ownership of the policy to us, the following good things happen:

 

• an income tax charitable deduction, available under most circumstances;
• tax savings from use of the deduction, which can be invested for future income;
• removal of death benefits from a taxable estate, reducing the future estate tax payable.

 

When Imago Dei MCC keeps the policy, then you make annual tax-deductible gifts to us that will cover the continuing premium cost. Although this delays us realizing your gift, the future benefits can far exceed the current surrender value. Since the subsequent gifts are deductible, you are using pretax instead of after-tax dollars. Also, it is possible to use appreciated stock that otherwise is to be sold to fund your premiums, adding avoidance of the capital gains tax.

 

An outright gift of a paid-up life insurance policy makes an excellent charitable gift. Either Imago Dei MCC will take a policy's cash value or we will retain the policy for its ultimate death benefit. You receive a current deduction amounting to the cost of replacing the policy with a single premium life insurance policy at your current age (but not more than you've invested in the policy).

 

You can also donate an existing policy and keep up the premiums. If you should lapse on the payments, Imago Dei MCC can either receive the current surrender value of the policy, buy a smaller, yet paid-up policy with the policy's cash value or possibly even continue the premium payments for the life of the insured. Group term life insurance or employer group coverage above $50,000 also make suitable gifts to charity.

Entering into a new life insurance contract, rather than using an existing policy, is another way of making a future gift for us work. Gifts to us to cover the initial and subsequent premiums are tax deductible, which, for those who itemize, reduces the net cost by the amount of income tax savings. This method can be especially attractive to younger donors.

 

You can take out a new policy with us as owner and beneficiary. Your continuing premium payments, usually gifted directly to Imago Dei MCC, are income tax deductible.

 

If you are unable to let go of other assets, contributing life insurance is a perfect and easy solution. Your greatest reward is the personal satisfaction of helping Imago Dei MCC with a larger gift than you thought possible. But you also may increase your cash flow and secure important tax savings.