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Gifts of Life Insurance
Life insurance is also an excellent tool for accomplishing philanthropic goals while realizing other important financial objectives. Indeed, life insurance can empower individuals to make charitable gifts they never would have dreamed possible.
Making a gift of life insurance is quite simple. If you are the insured-policyowner you simply transfer physical possession of your policy to the charity of your choice and file an absolute assignment or transfer of ownership form with your insurance company. Your company then will send a letter to the charity showing that the charity is the sole owner of the policy. If you do not change the beneficiary of the policy to the charity prior to transferring ownership, the charity should name itself as beneficiary after ownership has been transferred.
Hypothetical Example
Emmett owns a $100,000 life insurance policy with a cash value of $40,000. No further premiums are due and he no longer needs the coverage. He can assure that his charity will receive $100,000 at his death by making the charity the beneficiary. Or he can transfer ownership of the policy to them now. When he transfers ownership, Emmet receives a charitable deduction equal to the lesser of his cost basis or the fair market value. The fair market value is defined as the interpolated terminal reserve plus unearned premiums.
