Life Insurance As a Legacy Gift
Life insurance is often used to protect your family from financial ruin. However, life insurance can also be used to leave behind a legacy. When used for this purpose, life insurance is considered a charitable gift.
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Benefits
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You can give money to your favorite charity without using any of your own savings, or very little of your own savings. In effect, you are leveraging your savings while not committing it to the charity. You are able to keep your money intact if you need it in the future.
Drawbacks
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If you make a life insurance policy a charitable gift within three years of your death, the total death benefit amount may be included in your estate. This may cause your beneficiaries to pay estate tax on money that they never receive.
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Considerations
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Make sure that you name your life insurance as a charitable gift early on in your life to avoid any complicated tax implications. Also, make sure that the charity understands that it is receiving the death benefit as a charitable gift.
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