People can either make tax deductible charitable gifts to a university while they are living or leave a legacy when they eventually pass away. The charitable gift of life insurance can be an affordable and generous method for alumni to make a substantial charitable donation to their university.
Life insurance offers a great way to leverage affordable tax deductible premium payments into a meaningful future donation.
The charitable gift of a life insurance policy to your school allows people of all income levels to contribute at a much higher level compared to donating money directly to the college.
A charitable life insurance gift has a multiplying effect, whereby, a smaller premium creates a much larger benefit for your school.
There are three common ways to help out your alma mater with a charitable life insurance policy.
Methods to Give a Life Insurance Policy to a University:
- Designate the University as a Beneficiary
- Donate your Life Insurance Policy to the University
- Purchase Life Insurance
Designate the University as a Beneficiary
This gift of life insurance is as simple as updating your beneficiary designation to the University which will receive the death benefits when you die.
This simple method allows you retain ownership of the policy and have the flexibility to make changes to the beneficiary designation in the future.
You can designate your school as the primary beneficiary for a percentage or specific amount.
You can also make the university the contingent beneficiary so that we will receive the balance of your policy only if your primary beneficiary doesn’t survive you.
This is ideal for people who already have life insurance policy and no longer need the coverage because children are now adults or their spouse has passed away.
Keep in mind, when the college is listed as the primary beneficiary or the contingent beneficiary but not as the owner, there is no current charitable deduction
Donate your Life Insurance Policy to the University
You can also donate your existing life insurance policy directly to the university. Your college will assume ownership and will also be the beneficiary the policy.
Since, you are giving up ownership of the policy; you can also claim a federal income-tax deduction for your donation. The deduction is for either the tax basis or the policy’s cash surrender value, whichever is less, for the year in which the policy is donated.
If the policy is a paid-up policy you will only receive a one time deduction for the year the policy is donated.
If the policy requires future payments, each additional payment is also tax deductible as a charitable gift.
Some states do not allow a charity to purchase a donor’s life insurance policy. Please check with the IRS, your attorney, or tax adviser for the laws applicable in your state of residence.
Purchase Life Insurance
You can also gift donations to purchase a life insurance policy on you, with the death benefits payable to the university upon your death.
The university will be the irrevocable owner and sole beneficiary of the life insurance policy. Each year you will make tax deductible gift of the premium amount directly to the college.
Your school uses these funds to pay the premium to the life insurance company. The university will receive a death benefit when you pass away.
In order for this strategy to work, you will need to be in decent health in order to qualify for the life insurance policy. The qualification process for life insurance will include both medical and financial underwriting.
This strategy is ideal for younger alumni and healthy older donors who may not have the liquid funds to make substantial donation now, but eventually want to leave a legacy to their favorite school.
Applying for Charitable Life Insurance
Finally, the type of life insurance policy you chose is very important for this college gifting strategy to work. It is prudent to always select a policy which has both a guaranteed premium and death benefit for your entire lifetime.
Affordable Life USA can help you find a new life insurance policy from a network of 186 top life insurance companies. We work diligently with our clients to match their charitable planning needs with a customized life insurance plan from highly rate insurance companies like:
- Banner Life,
- American General
- Protective Life
- Lincoln National
We can assist you with your existing policy or help you find the best life insurance plan for new coverage.
To get quotes for charitable life insurance for your school, use our life insurance calculator for great Life Insurance Quotes.
If you are interested in learning more about helping your university with a charitable gift of life insurance, please do not hesitate to call us at 1-877-249-1358.