Donating to a charity can be a rewarding personal experience. Whether you choose to do this during life or by naming a charity as a life insurance beneficiary, it is a win-win situation.
By either giving the policy to an organization or naming the organization as a beneficiary, you will ensure your favorite charity will receive the funds they need to help others. If you like to think outside the box, the death benefit proceeds given to your family can provide the financial flexibility to make donations to the charity of their choice.
Marc Belletsky, spokesperson for The Hartford, said one of the biggest reasons against designating a charity as a beneficiary, is that it is more advantageous to both sides if you make it a gift instead.
“If you list a charity as a beneficiary to be paid upon death, you won’t receive any income tax benefits while still alive,” Belletsky said. “You can also tell the charity to take out a policy on your life so that they can double any financial gift you give them.”
If you choose to donate to a charity through life insurance, it’s customary to list the charity’s licensed tax name as the primary beneficiary. Or you may extend your wishes in a will and the beneficiary can follow through with donation once collecing the policy’s death benefit.
Belletsky also said that by making a charitable gift during your lifetime, you will get charitable deductions that can be used to offset any estate taxes after you die.