Reasons for charitable giving vary from person to person. Most often, you simply want to give back something to organizations that have given so much to you or someone you know.
Despite your willingness to give to religious, educational and other Portland charitable organizations, you may not be able to contribute enough to make an impact.
Charities are trying to do more for people who need assistance and guidance, yet endowments and donations are paying for less of their operating expenses.
Consider a gift to your favorite charity: a gift of life insurance. You can either donate money to a qualified charity to enable it to purchase, own, pay the premiums and be the beneficiary of the policy, or donate an existing policy on your life to a qualified charity. You also can make the charity the beneficiary on an existing policy, but this does not have the same income tax advantages.
A qualified charity is a school, university, hospital, state or federal governmental entity, or corporation or trust organized and operated exclusively for religious, charitable, scientific, literary or educational purposes.
You may receive a federal income tax deduction, not exceeding 50 percent of your adjusted gross income, for contributing money to a qualified charity to enable the charity to purchase, own, pay the premiums on and be the beneficiary of the proceeds of a life insurance policy on your life. Such a contribution or contributions would also be fully deductible for federal gift tax purposes.
If you choose to donate an existing whole life insurance policy on your life to a qualified charity, your federal income tax deduction will be limited to the total premiums you have paid on the policy (minus any withdrawals or loans) to the date of the donation not exceeding 50 percent of your adjusted gross income.
Under current tax law, subsequent payment of premiums on the policy directly to the qualified charity would also generate income tax deductions. The federal gift tax charitable deduction will also shelter your transfer of complete ownership of the policy to the charity and/or your payment of payments of premiums on the policy from federal gift taxation.
If you die within three years of designating a qualified charity as the beneficiary of a life insurance policy on your life or within three years of transferring ownership of a policy on your life to a qualified charity, the proceeds of the policy will be deductible from your gross estate for federal estate tax purposes.
There are several options when it comes to choosing a life insurance policy to fit your charitable giving contributions. Your Portland Financial Advisor can help you determine which life insurance policy best meets your needs. You can choose to make a one-time payment or you can make regular yearly payments to fund your policy.
- Single Premium Whole Life: You can make a lump sum payment and have a paid-up policy. It will continue to increase in value and is a great way to transfer money to your favorite charities.
- 20-Pay Life: When you make 20 equal payments annually, this policy is paid up, but continues to increase in value.
- Life Paid Up At Age 65: This policy requires no more payments after age 65. This allows for a lower premium and helps plan for your retirement years.
- Executive Whole Life: This policy is a good choice if you want to make lower annual payments. Premiums are paid annually for the life of the policy.
- Life insurance proceeds will probably provide a larger gift to the charity than you could have otherwise provided utilizing out-of-pocket dollars. You will also ensure that the beneficiaries of your remaining assets will not be required to share such assets with the qualified charity after your death. Moreover, the money or proceeds will be promptly paid to the charity following your death, thereby avoiding the costs and delays associated with the payment of property or money to the charity from your probate estate.
For more information on utilizing life insurance as part of a charitable giving program, contact Your Portland Financial Advisor today and contribute to the success of your favorite Portland not-for-profit organization tomorrow.
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