There are numerous people that have charities that are near and dear to their heart. Throughout their lives they may give a considerable amount of their time and money to specific charities. Such individuals may also want to continue giving to these particular charities even after they pass on. The individuals that want to leave funds to a charity upon their demise have the option of obtaining life insurance for a charity. Although this may sound somewhat peculiar, there are a number of people that take this particular route in order to ensure that their special charities continue to receive the monies they are used to receiving even after a person’s demise. While some individuals may choose to leave monies to a charity via a will, obtaining life insurance for charity is usually the best way for an individual to leave a specific amount of money for their charity without having to worry about such issues as the will being contested.
What is Life Insurance for a Charity?
Those that are unfamiliar may want to know what is life insurance for a charity? Life insurance for a charity is basically setting up an insurance policy so that a charity is able to receive funds upon a person’s demise. In many ways, the charity is the beneficiary. However, there are circumstances where the policyholder of the life insurance policy can decide that the charity itself will be the policyholder. It is very important to understand that life insurance for a charity only becomes effective for payout when the policyholder passes away. For some, this is an excellent way for them to be able to make sure that their favorite charities receive income even after their death. In order to keep the life insurance for a charity applicable and active, all premiums must be paid in full on a timely basis.
What is the Purpose of Life Insurance for a Charity?
As stated before, the main purpose of life insurance for a charity is to make sure that a charity is able to receive funds upon a person’s demise. Often times people that leave monies to charities usually do so because these charities are close to their heart. They have probably already formed some type of relationship with the charity and they want to continue to provide financial support even after death. In other cases, a person may just simply decide they want life insurance for a charity because they want to give a specific amount to a particular charity upon death. Individuals that choose to obtain life insurance for a charity have a number of ways of executing this type of policy. Some individuals choose to purchase a new policy where the charity becomes the policyholder. Then there are others that may decide to purchase the insurance policy under their name and then simply make the charity a beneficiary. There are also cases where individuals decide to make their estate the beneficiary and then a certain amount is set aside as a bequest to the charity in the will. Ultimately, the whole idea of life insurance for a charity is to provide a charity with monetary support after a person passes away. This is an excellent option for anyone that has developed a firm relationship with a charity that they truly believe in and want to make sure that the charity is properly funded in the future.
How Individuals and Charities Benefit From These Policies?
It should be noted that with life insurance for a charity both the individuals and charities benefit greatly from these types of life insurance policies. Individuals that choose to obtain a life insurance policy for a charity benefit greatly through a number of tax benefits. The ways in which an individual receives the tax benefits from a life insurance for a charity depends on how the policy is executed. If an individual decides to purchase an insurance policy and make the charity both the beneficiary and the policyholder, then any premiums that are paid on this particular life insurance policy are considered a tax-deductible donation. In the case where an individual decides to make the charity a beneficiary on a pre-existing life insurance policy, then the individual will not be able to receive any tax benefits on the premiums paid out. However, as long as the policy has a cash surrender value, the charity can provide a tax receipt which is equal to the amount of the cash surrender value. The individual will be able to claim a charitable donation credit once the transfer of the policy ownership to the charity is confirmed.
Overall, obtaining life insurance for a charity is an excellent way to support causes that are near and dear to one’s heart after one passes away.