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Charitable Giving


Winston Churchill once said, "We make a living by what we get, but we make a life by what we give." This is true no matter how grand or modest a contribution you can afford. And the fact is, your gift or bequest can have a significant and beneficial impact on the lives of others - if you know how to give most effectively.

A charitable gift of a life insurance death benefit can multiply the impact of your donation many times over. It allows you to leverage your gift and ensure that your own personal contribution impacts your charity directly in a way greater than you thought possible. Even if you have a limited discretionary cash flow, you can make a meaningful gift using a life insurance policy while your charity could receive significant sums of money.

Besides the good feeling that you can get from gifting to your charity, the other benefits are substantial.

  • You control the amounts that you gift to your charity. Your gift may be made over one, two or ten years. The amount that you gift is a charitable contribution for which you may receive an income tax charitable deduction, subject to limitations.
  • The amount that you gift is leveraged. The gifts to the charity that are used to pay life insurance premiums are only a fraction of the amount that the charity can receive at the death of the insured(s).
  • Since the policy is owned by the charity, all rights associated with the policy belong to the charity. Therefore, it may borrow from any cash values in the policy or take loans out on the policy. (Loans and borrowing from cash values reduces the death benefit.) The benefit to the charity is immediate. Even if you die today, the charity will receive the death proceeds from the policy, provided they haven't borrowed against the policy.
  • A policy, which is owned from inception by the charity, is not an asset included in your estate at your death. Therefore, your estate has no legal or administrative charges associated with the gift to your charity.

Gift Of An Existing Policy To A Charity

If you have an existing life insurance policy that you wish to gift to your charity, there are some issues you may want to consider. In order to gift the policy, you must assign all rights and deliver the policy to the charity, retaining no interest in the policy. You may be eligible for an income tax charitable deduction based on the value of the policy transferred to charity. The value of the policy is the lesser of its fair market value or its cost basis. Depending on the nature of the charity, whether the gift is made "to" or "for the use of" the charity, the amount of your contribution base, adjusted gross income and the carry-forward provisions, your income tax charitable deduction may be limited.

Charity As Owner And Beneficiary Of A New Policy

Another alternative is to purchase or have your charity purchase a life insurance policy on your life, with your charity as owner and beneficiary. Your state law will dictate whether or not a charity has an insurable interest in a donor. If the purchase of life insurance by a charity is allowed by your state, then you can provide the funds to enable the charity to purchase the life insurance policy. Your charity will receive all rights under the life insurance policy. Therefore, it may take a loan, surrender the policy or change the beneficiary designation. Additionally, since your charity is the owner of the policy, none of the death proceeds will be included in your gross estate at your death. For the cost of the premium payments, you may be able to provide a significant gift to your charity. As with a gift of an existing policy, depending on the nature of the charity, whether the gift is made "to" or "for use of" the charity, the amount of your contribution base, your adjusted gross income and the carry-forward provisions, your income tax deduction may be limited.

The Income Tax Charitable Deduction

In many cases, your gift to a charity may result in an income tax charitable deduction. There are deduction limitations, depending on the form of the gift. If you pay the premiums to the life insurance company itself, you may be eligible for an income tax charitable deduction subject to 30% of your adjusted gross income because the gift is "for the use of" the charity. If you gift the premium payments directly to your charity, your deduction limitation may be subject to 50% of your adjusted gross income because it is a direct gift "to" your charity. In addition, most itemized deductions, including the charitable deduction, are subject to a phase-out at higher income levels.


A gift of a new or existing life insurance policy to your charity may enable you to donate a significant amount to your charity while actually gifting a lesser amount through the payment of premiums. Your charity can receive the funds to carry on its good works and you receive the satisfaction of giving for all you have received.

*Lincoln Financial Advisors Corp. and its representatives do not provide legal or tax advice.It is not our position to offer legal or tax advice. You may want to consult a legal or tax advisor regarding this information as it relates to your personal circumstances.