Gifts of Insurance


A gift of life insurance allows you to make a larger donation to a charity or non-profit organization than you would have thought you could afford, at relatively little cost. A gift of life insurance is a deferred gift, which means that the proceeds from a gift commitment made now will be realized by the organization sometime in the future. A gift of life insurance also allows flexibility in structuring your gift to your tax relief goals.

Advantages:

  • A gift of life insurance does not reduce the value of your estate for your loved ones.
  • Life insurance proceeds are paid directly to the charity and are not subject to probate fees.
  • You have the ability to determine how you want your resulting tax credits structured. Life insurance can provide an annual tax credit or a tax credit in the year of death. How you structure your gift will depend on where you may have the greatest need for tax relief.

How does it work? Some options:

  1. You can purchase a new policy, naming the organization as the irrevocable owner and beneficiary. You then pay the premiums and receive an income tax receipt yearly for the full amount of all premiums paid.
  2. You can donate an existing policy that you no longer need, by designating the charity as the irrevocable owner and beneficiary. The organization will usually give you a tax receipt for the net cash surrender value (less any outstanding policy loans) and any subsequent premiums paid.
  3. You can make the organization the beneficiary of a new or existing policy. As amended in the 2000 federal budget, a charitable donations tax credit will be available when a donor designates that the death benefit proceeds of his/her policy be paid directly to a charity.
  4. You may have a life insurance policy from your employer or former employer that you want to donate. Since you will not be able to change the ownership, you would make the non-profit organization the beneficiary of the policy. As above, a donations tax credit will be available when the death benefit proceeds from the policy are paid directly to the organization.