Charitable Life Insurance Program to Donate to Charity
Gifting life insurance to charity: Most of the people think to take life insurance policy because they want to sure their family after death. In this tough economy, it is now a time for a new theory of giving. Life insurance policy can be great source of charity. Here we will discuss on donating life insurance to charity in Canada and any other place.
First, let’s know what life insurance is. It is a policy which allows tax free and death benefit plan that transferred to the beneficiaries. Secondly, the charity amount is provided as a tax deduction in gross estate. Any person may buy a fresh policy on the name of charity or may assign own policy for charity purpose. The question may arise that why should we transfer while you alive. It is because person gets benefit in the form of income tax deduction in year of transfer.
Let’s discuss on charity owned life insurance program. To make it easy to understand how the policy works, one hypothetical example is here: Suppose, there is 58 years old woman who have $10 million estate and she wants to give a big donation to charity. She could directly donate $5 million or she could buy $10 million life insurance policy with an increasing death benefit at a cost of $718,000 per year for seven years. If the value of the life insurance policy grows at 7.5% over 30 years, a charity would receive almost $27 million upon her death.
According to senior financial planner of MetLife Financial Group, A policy gift can be very powerful and allow ordinary people to make larger contributions. The charity receives the insurance proceeds when a person dies and when he makes annual donations of the premium, he get tax deduction for current year.
There should be some care needed for planning. Make sure that plan meets to current financial needs and provides proper coverage for beneficiaries and also to the charity. Everyone is not qualified for amount of life insurance that divide between both nears and charity. The qualification process includes medical as well as financial underwriting.
One important thing is to choose a right life insurance plan. Term insurance ends as its term over. If a donor lives after the term, the charity beneficiary receives nothing at all. Whole life insurance policies are expensive but cover more benefits. Before purchasing life insurance for charity, check the organization well because transfer is irrevocable after owner transfers policy to another (for charity).
More Related Queries:
- Gifting/donating life insurance to charity
- Donating term life insurance to charity in Canada
- Charitable life insurance program/ Make Charitable Donations
- Accounting for donated life insurance policy/ charitable trust
- Naming a charity as beneficiary of life insurance