Gifts of Life Insurance
Individuals frequently have life insurance policies that are no longer needed for the purpose for which it was originally purchased. If these are policies other than term insurance, they may have a substantial cash surrender value. Giving such a policy to a charity results in a gift that does not require a cash donation.
The gift of an "in-force" insurance policy (premium payments are up-to-date) is accomplished by first changing the beneficiary of your policy to the chosen charity and then transferring the ownership of the policy to the charity as well. When the charity is notified by the insurance company that it has become the beneficiary and owner of the policy, the charity may issue an official receipt for the donated policy based on the fair market value (FMV) of the policy. An actuary will determine the FMV by considering the policy's cash surrender value, the policy's loan value, the policy's face value, the state of health of the insured and his/her life expectancy, the policy's conversion privileges, other policy terms (term riders, double indemnity provisions), and the policy's replacement value.
You as the donor may have to report a portion of the policy value as ordinary income if the cash surrender value exceeds the adjusted cost base of the policy. This information will be provided to you by the insurance company.
If you have any questions, contact us.
The purpose of CCCC Stewardship Services is not intended to replace legal and other professional advisers. The goal is to provide Christians with information based on biblical principles to enhance the stewardship of resources entrusted to them.
The CCCC Seal of Accountability indicates that a charity adheres to high standards. Look for the Seal of Accountability when making decisions about which Christian charities to support.
