Life Insurance Policies: A Little-Known Strategy for Charitable Giving

Gregory Camperos, CFP® | November 14, 2023

Traditionally, life insurance is a policy based on the insured’s life and upon their death, assuming required premiums have been paid, the beneficiary (typically an individual) receives a payout. But did you know that the beneficiary of the payout doesn’t have to be a person? In some cases, individuals have named a trust or even a favorite pet as the beneficiary. The list doesn’t end there. As the policy holder, you could name a charity or other qualified organization as the beneficiary as well. It is an interesting strategy to consider for those who are charitably inclined.

There are several ways donors can take advantage of this strategy: 1) making an absolute assignment of a new life insurance policy or currently owned policy, 2) donating a new or existing life insurance policy, or 3) having the charity purchase a policy on the donor’s life. Following the gift, the donor may be entitled to receive an immediate income tax deduction while the charity would receive a donation that exceeds the cash outlay (annual insurance premiums) of the gift. As this form of gifting is more nuanced than simply writing a check to your favorite cause, it is important to consult both your tax advisor and the charity since it would assume the costs. If the plan is the right fit for both the donor and the charity, it can be a powerful way to show your support and provide the charity with an appreciated donation.

To learn more about gifting a life insurance policy, connect with your Bordeaux service team or your tax advisor.

Important Disclosures

The material for this article was gathered from sources believed to be reliable, however BWA cannot guarantee the accuracy or completeness of the information, and certain information presented here may have been condensed or summarized from its original source. This article is not intended to provide tax or legal advice, and nothing contained in these materials should be taken as such. To determine which strategies may be appropriate for you, consult your tax and financial professionals. Investment Advisory services are offered through Bordeaux Wealth Advisors, LLC. Advisory services are only offered where Bordeaux and its representatives are properly licensed or exempt from licensure. No advice may be rendered unless a client agreement is in place