Gifts of Life Insurance

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Gift of Life Insurance

Another form of planned giving is the gifting of life insurance policies to the Foundation. These types of gifts, also often overlooked by donors, can be an important and powerful form of planned giving.

There are several ways you can use the gift of life insurance for a charitable gift:

You can make the Foundation a Beneficiary of your Life Insurance Policy

You may wish to make the RiteCare Childhood Language Centers of California, a program of the California Scottish Rote Foundation the beneficiary (or a contingent beneficiary) of a life insurance policy as a way to make a sizeable future gift.

  • You retain lifetime ownership of the policy.
  • You keep the right to cash it in.
  • You can borrow against it.
  • You can change the beneficiary.

A gift of this nature is treated much like a bequest made through your will. Because you retain the ownership of your asset (the policy), you will not receive an income tax charitable deduction for this future gift or for your premium payments during your lifetime. The policy’s proceeds will be included in your gross estate, and your estate can take an estate tax charitable deduction.

Making a Gift of your Policy

You may wish to transfer ownership of a policy to the RiteCare Childhood Language Centers of California, a program of the California Scottish Rote Foundation, or purchase a new policy with the Foundation as the owner and beneficiary. If you make a charity the owner and beneficiary of a policy, you are then entitled to certain tax advantages.

Wealth Replacement Using Life Insurance

A donor may make a current gift to the Foundation and receive a charitable tax deduction. At the same time, the donor may purchase life insurance to replace the donated amount or perhaps, the amount after estate tax that the beneficiaries would have received. Depending on the circumstances, the charitable tax savings and any life income from the gift may defray the cost of the wealth replacement insurance premiums.

Creating a Life Insurance Trust

You may want to set up an Irrevocable Life Insurance Trust (ILIT). An ILIT removes the life insurance from your estate to help reduce estate tax while providing other benefits.

Although ILITs can be expensive and more complicated than owning life insurance directly, they may be an attractive option in certain situations.

As with all matters concerning estate planning, please consult your estate and tax specialists.