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Charitable Gift Life Insurance

Charitable Gift Life Insurance

What Is Charitable Gift Life Insurance?

Charitable gift life insurance alludes to a life insurance policy where the beneficiary is a registered charity. In doing as such, the giver pays the premiums on the life insurance policy, with the aim that proceeds from the policy will be paid to at least one charitable organizations upon the contributor's death.

The beneficiary or beneficiaries picked should be a qualified 501(c)(3) charity that meets the Internal Revenue Service (IRS) definition of a nonprofit organization.

How Charitable Gift Life Insurance Works

Charitable gift life insurance can be a helpful vehicle for philanthropy in light of multiple factors. To start, the death benefit paid upon the giver's death is excludable from their taxable estate. Be that as it may, the giver doesn't receive a tax deduction for the premiums paid every year prior to their death.

These policies can likewise be useful in making it totally clear where the contributor wishes to give their funds. All things considered, listing a charity as the beneficiary of a life insurance contract kills any vagueness with respect to how the giver planned their money to be utilized. Thusly, charitable gift life insurance can assist with decreasing the risk of legal questions among the giver's enduring family individuals.


Charitable gift life insurance can be structured to incorporate different beneficiaries and can be written to guarantee the identity of the contributor or beneficiaries are anonymous, even after the giver's death. This can assist with keeping away from probate questions.

Special Considerations

Contingent upon the subtleties of the insurance contract, the benefactor might hold the right to change the beneficiary of the life insurance policy prior to their death. By listing a charity as the policy's revocable beneficiary, the contributor can partake in the flexibility of adjusting their perspective in the event that their financial situation changes.

Simultaneously, givers can appreciate flexibility by pulling out cash from their policies or even borrowing against the equity in their insurance contract. Of course, these activities would include some significant downfalls, by decreasing the amount of money accessible to the beneficiary upon the benefactor's death.

Charitable Giving Riders

Another option is to incorporate a charitable giving rider that can be connected to a life insurance policy, instructing the insurer to pay a specific percentage of the policy's face value to a qualified charity of the policyholder's decision, albeit at times there are limitations put on the maximum passable gift amount. A rider is an insurance policy provision that adds benefits to or changes the terms of a fundamental insurance policy.

Charitable giving riders generally come at no extra cost and frequently don't reduce the cash value or the death benefit of the policy and effectively dispense with the need to make, pay for, and administrate separate gift trusts until the death of the insured.

As opposed to naming a charity as a beneficiary or adding a rider that makes a comparable difference, the act of gifting a life insurance policy can enormously reduce the giver's taxable estate, which can save large number of dollars in estate taxes for higher-pay taxpayers.

Certifiable Example of Charitable Gift Life Insurance

Mary is thinking about different options through which to support three conspicuous foundations in her community. Beside giving straightforwardly to those foundations every year, another option accessible to her is to end a life insurance policy in which these three causes are listed as the beneficiary. Mary would then pay the premiums on this life insurance policy. At the point when she bites the dust, the death benefit from the policy would be paid to these foundations.

Albeit the premiums paid on the policy won't be tax-deductible, the death benefit itself will be tax-deductible for estate planning purposes. Also, supporting the causes thusly will have the additional benefit of making it extremely obvious to her enduring family individuals that the money being referred to is planned for these specific foundations. Consequently, charitable gift life insurance can be a useful method for decreasing the risk of probate debates.


  • Charitable gift life insurance is a form of philanthropy wherein a charity is listed as the beneficiary of a life insurance contract.
  • The giver pays the premiums associated with the contract until their death.
  • An insurance policy can be structured to give flexibility to the contributor, for example, by permitting them to change the beneficiary prior to their death.