Sometimes people outgrow their life insurance policy. You could cash it out, but if you have more altruistic notions, you could donate the policy to your favorite charity. Estate-planning lawyer Kyle Krull says that donating a policy creates a greater positive effect.
Two Options Available
You can either name the charity for the beneficiary after you have died, or you can directly transfer ownership of the policy. If you stay the owner, however, you will not be able to take a charitable income-tax deduction. Nevertheless, once ownership has been transferred, you cannot change your mind.
What are Signs You Do Not Need Life Insurance?
If your children have achieved financial independence and your other savings meet your retirement needs, then donating a policy becomes an attractive option. Another option available, you could withdraw or borrow against the policy to meet your retirement needs.
Taxes to Consider
In order to get a tax deduction, you need to transfer policy ownership to the charity. In doing this, you will be entitled to a charitable deduction. Additionally, if you continue to pay the premiums, each payment is considered a deductible charitable donation.
Always Know the Organization
Before making a transfer, fully understand the organization you will be donating the policy to. It is an irrevocable transfer, so if you donate to an untrustworthy organization, you will be out of a policy and the money given.
Before making a donation, you should first determine your estate planning needs. You want to first make sure that your current financial needs are being met and that your heirs are financially independent. Donating a life insurance policy to a charitable organization is one method people are using to make a bigger difference in the world. Beacon Wealth Advisors stated, "It's a way to give without coming up with a lot of money."
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