Vail Valley personal finance: consider life insurance gifts to charities |

Vail Valley personal finance: consider life insurance gifts to charities

For many people, the holidays bring a strong impulse to do something more than just the usual gift-giving to family and friends. Sometimes this desire yields a token gift of “wallet leftovers.” Still, there is another way to provide a significant charitable gift that doesn’t require a seven-figure income.

It is possible for people of average means to make a substantial financial gift to their congregation, alma mater or nonprofit organization through the gift of life insurance. Life insurance may allow people to give more than they ever dreamed possible.

Typically, individuals choose to give permanent life insurance to charities. Traditional whole life insurance may cost a bit more initially, but the product’s annual premiums do not increase over time. Upon the death of the insured, the life insurance company pays a death benefit to the beneficiary of the life insurance contract (e.g., the charity).

The mechanics of giving a life insurance gift are simple. The insured can name the charity as his or her beneficiary, meaning the charity receives the contract’s death benefit at the donor’s death. The death benefit will be included in the insured’s estate, but an estate tax deduction is available for the amount of the proceeds.

Another option for the insured is to irrevocably name the charitable organization as owner (and 100 percent beneficiary) of the contract. Upon transfer of ownership, the donor continues to pay all premiums. This gift may allow the donor to receive a current income tax deduction equal to the lesser of the cost basis (the premiums paid) or the fair market value of the contract (roughly equal to the cash surrender value if the contract has been in force for some time).

Whether a person donates an existing contract or starts a new one to fund a charitable project, life insurance offers a unique way to leverage relatively modest annual payments into a sizable charitable gift.

During this season of gift giving, don’t forget to consider giving a charitable gift. Through life insurance, many people can give a larger gift to charity than they thought possible.

Certified Financial Planner Patricia French is a Financial Representative with Thrivent Financial for Lutherans. She can be reached at 970-926-0251.

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