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Charitable Choices: Is a Life Insurance Policy the Right Way for Me to Give?

“I wanted to make sure the charities I care about received gifts from me and my late husband in perpetuity. I set up a whole life policy with my insurance agent with the Foundation as the beneficiary. I pay the premium to the Foundation each year and receive a tax deduction. When the policy pays out, the Foundation will make gifts annually to my favorite charities.”

Ms. Jamie Young McCulloch donated her insurance policy to CCCF for all the right reasons, and she understands the benefits. We spoke with Daniel Scurry, a financial advisor with Northwestern Mutual here in Columbia, about the logistics and the benefits of giving an insurance policy. If you’re considering a gift of life insurance, read on!

How can my life insurance gift benefit causes that are important to me?

Daniel Scurry: A gift of insurance can benefit your favorite charity now and after you’re gone. It allows you to give more than you might be able to give through a traditional cash donation, since you pay pennies on the dollar in terms of your gift’s ultimate benefit. It’s one of the most economical ways to leverage your dollars to maximize your charitable gift.

Can my gift help CCCF while I’m alive?

DS: When you gift life insurance to a nonprofit, it’s usually a whole life policy. Whole life insurance is different from term life insurance. In the same way your mortgage builds equity in your home, a whole life policy builds equity in the form of cash value. And since the charity owns the policy, it might be possible to leverage the cash value within the policy to do something like refurnish their offices.

How does giving through a whole life insurance policy affect my taxes?

DS: When it comes to your taxes and a whole life policy, the IRS only cares about one thing, whether or not the policy (and the equity) can ever benefit you or your heirs. By making a charity like Central Carolina Community Foundation the sole owner of the policy, you give up the right to the equity and any future proceeds, even as you continue to make the payments. The IRS sees each of your payments as a tax deductible donation to a nonprofit.

How hard is it to get a whole life policy?

DS: If you’re in generally good health, it’s not hard at all. Also the underwriting requirements for a whole life policy can be less stringent than they are for term life. Underwriting requirements are based on the amount of life insurance one is applying for. If someone is applying for $100,000 or less, they may not even need to do a medical screening.

How can my life insurance gift to CCCF leave a legacy?

DS: You can make a meaningful contribution after you’re gone. Let’s say you live near the Saluda River and want to ensure that it, and the wildlife living on it, stays protected from pollution. You could buy a policy for the benefit of the Saluda Riverkeeper, a nonprofit organization that helps protect it. Your policy can support them while you’re alive. And when you’re gone, they’ll get an immediate injection of cash to further their mission. A gift of life insurance to your favorite charity avoids probate and makes your wishes clear to your heirs and to the beneficiary so there isn’t any complications about your intentions after you’re gone.

Is life insurance the best way for you to give? Get in touch with Heather Sherwin today at [email protected] or 803.978.7831 to talk about it!

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