You can use your life insurance policy as a charitable donation if you are that kind of a person who is always concerned about the welfare of others. You can donate your life insurance policy to a charitable organization. Donating your life insurance policy to a charitable organization will entitle you to a tax-deduction. The charitable organization must be a non-profit organization that has a 501(c) (3) status. The charitable organization will appreciate the thought of a life insurance donation. Most of them will prefer to have use of the donation immediately. Smaller organizations have limited resources and are more than likely welcome any contributions they can get, even if they have to wait for the payout. If you are donating with the aim of getting the tax deduction, you must make sure you name the organization as both the beneficiary and the owner of the policy. If you name it as one or the other, you will not be able to deduct the donation proceeds from your taxes. Your deductions will depend on the type of policy you donate. The law says if you donate a term life insurance policy, you can deduct the premium from your taxes, where as if you donate a whole life insurance policy, you can deduct the cost of the premiums and the cash value from your taxes.
There are other methods of using your life insurance policy as a charitable donation. You can allocate the dividends paid by your policy to a charitable organization. This can be done anytime while your life insurance policy is in effect by contacting your insurance company or you can make the designation on your policy application. You to take a tax deduction each year as the dividends are paid out.
If you want to give the proceeds of your death benefit to a charity as well as your family, but cannot afford to pay the premiums on a second policy, you can name the organization as one of your beneficiaries. A portion of your death benefit can be given to that organization, while you retain a substantial amount to distribute to your family or other beneficiaries. Remember this option does not provide you with any tax benefits but you can simultaneously subsidize a charity and give a gift to your heirs. The amount of your charitable donation is deductible from your gross estate. So go ahead. Donate your life insurance policy and fulfill your desire of a making a charitable donation.
