Fund Raising Ideas for Groups in the New Millennium!
Term Life Insurance As A Charitable Gift
by Sharon Taylor
There are several ways in which to give a gift of life insurance to a charitable cause. First, you can purchase a new term life insurance policy altogether, leaving the charity of your choice as the beneficiary. Or, you can simply change the beneficiary of your existing term life insurance policy. Upon your death, the named charity would receive full face value of your policy.
When you list a charity as your beneficiary, you will need to have the following information:
1. The full legal name of the charitable organization. 2. The charitys permanent mailing address. 3. Your charitys federal tax identification number. 4. Your relationship to the beneficiary: to be listed as "charity"
Charities always have someone in charge of organizing and accepting gifts and donations. You can be certain that they will be happy to help you should you have any questions on the gift giving process or need help in filing any forms.
Rules for Paid or Unpaid Policies
If you choose to name a charity as the beneficiary of an already existing paid-in-full term life insurance policy, you may be able to deduct an amount equal to the fair market value of the policy, or your cost basis, whichever is less. Since your charity becomes the owner of your policy, the proceeds will not be included in your estate for tax purposes.
If you are still making annual premium payments on your policy, you may be able to deduct an amount equal to the approximate cash value of the policy or the policys cost basis, whichever is less, in the year in which you make the gift. Again, the proceeds will not be included in your estate for tax purposes. You may also be able to deduct any future premium payments.
Group Term Life Insurance
If you participate in a group term life insurance policy through your workplace, you can donate your excess coverage to your favorite charity as well. Many employers provide generous life insurance coverage as a fringe benefit to their employees. However, most employers do not tell you that you are also required to pay income tax on the cost of coverage over $50,000.00.
How do you avoid paying these taxes? There is a special rule that excuses this extra tax if you donate the excess coverage to charity. "Excess coverage" is an excellent way to donate to your favorite charity. The best part is that you pay no out of pocket expenses for premiums. You get all the benefits of giving while also saving money in taxes at the same time. For more information on "excess coverage" contact your companys benefits department.
Using your term life insurance policy as a gift to your favorite charity enables you to make tax deduction and/or to gain other financial benefits to your estate. Be sure to talk to a financial advisor to ensure that both your family and your favorite charity both benefit by your financial decisions.
Sharon Taylor is a veteran author and writes about life insurance and other financial management topics for eQUOTE Life Insurance, a leading Internet resource for free life insurance rates, quotes and information.
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