Insurance Tutor

Yes, you can donate your life insurance policy to charity. In fact, insurance can be a good way to leverage affordable premium payments into a substantial future donation.

There are several different ways you can give your life insurance policy (or the death benefits from it), to charity. Each method has different advantages and disadvantages to both you and the charity. One way to help your favorite charity is to simply name the charity as a beneficiary on your policy.

When you die, the charity will receive the life insurance death benefits. A disadvantage of this approach is that you will not get to take the charitable income tax deduction for the premium payments that you make. With this method, there are no gift tax implications. The proceeds of the life insurance policy will be includable in your taxable estate, but you will receive an offsetting estate tax charitable deduction.

Another way to help your favorite charity is to donate an existing life insurance policy to the charity. You will be able to claim an income tax deduction for either the tax basis or the fair market value of the policy (whichever is less) for the year of the donation. You can then make deductible cash gifts to the charity, which the charity can use to make the premium payments.