For those with wealth, leaving a lasting legacy for the people and causes they care about is deeply important.
How to go about leaving this legacy is different for every family and individual. One option to consider, however, was recently outlined in the Wall Street Journal.
If you have a life insurance policy that you or your heirs don’t really need, you can donate it to a beloved charity in one of two ways:
#1: Name the charity as the beneficiary of your policy.
In this option, you retain ownership of the policy. If, for some reason, you needed the cash value of the policy, it would be there. In addition, you have the ability to leave only part of the policy to charity and to change the beneficiary designation. Choosing this option will give you an estate tax deduction as well.
The main disadvantage to this option is that you will be unable to get an income tax deduction. Additionally, you will not be able to see the charity use your gift.
#2 Transfer ownership of the policy to the charity.
As the owner of the policy, the charity may choose to liquidate or maintain it. If the charity chooses the latter, you can continue paying the premiums.
Under this option, you have the ability to claim a charitable deduction for the policy’s fair market value or for the “basis.” The basis is “the accumulated premiums paid by the donor up to the date of transfer minus any dividends and withdrawals the donor received,” according to the article.
If you are considering making generous donations to your favorite charity, I recommend speaking with a qualified financial advisor as well as someone skilled in helping affluent families utilize their wealth without regrets.