Donating to a charity is a great way to give back to the community. Many people are left looking for additional outlets to contribute but some find it difficult to donate on a consistent basis. While your current financial situation can have a major impact on your ability to donate—life insurance policies are a great way to offer a donation without taking on additional financial risk.
We wanted to offer help to those who are looking to provide donations. That is why we put together this quick article that covers a few of the different ways you can use a life insurance policy to make charitable donations!
Changing the Beneficiary
One of the most common ways people are able to contribute their policy as a donation is to make the organization the beneficiary. This method is the easiest and will ensure the donation makes it to the charity of your choice. If you are not entirely sure how you want to distribute your policy, selecting a local charity or charities is a great way to make what can be a significant contribution to a cause in which you are passionate.
Working with Charitable Gift Riders
Newer life insurance policies will have the ability to leverage “gift riders.” These riders are a newer development to life insurance policies but can be attached to your policy and guarantee a better face value percentage when determining the gift amount.
The benefit of utilizing a charitable gift rider is the fact that it does not cost you extra to add to your policy. Additionally, it will be easier for the policyholder to configure the transaction. These riders do have a few limitations including the high amount of protection that must be purchased.
Luckily, the cost of your premium will be based on the riders and give you an option to redeem more during tax season. You are going to offer a better donation without affecting your current investments.
Gifting your policy dividends will not be as beneficial as the other strategies for donations but are still deductible through the premiums paid on the policy. Your donation will consist of the cash paid in dividends throughout the policy without forcing you to contribute additional cash.
If you do decide to go the route of transferring your dividends than you will need to work with a qualified expert to ensure that the transaction can go smoothly.
Donating the Policy
Donating the policy is likely the most effective choice for your transaction. By choosing to donate your policy you are giving better benefits to both parties but will need to previously organize the transfer. This method will get the full face value of your policy which is more than any gift rider would allow. The main cost to the policyholder will be the premiums paid on the policy.
Since you will be donating your policy you are not restricted to limits on the donation. These types of donations do not have a ceiling in effect which can be beneficial for tax purposes.
No matter which method you decide is the best for the donation of your policy, you will need to work with the right team to ensure that your donation is being handled correctly. If you are unsure about any part of the process than it is best to speak with a professional.
Contact us with your information so we can get you started. Now is a great time to explore your options for your policies and find the one that works best for you. Want to know more?