Life insurance has long played an important role in charitable giving. Whether you donate an older policy that you no longer need, or start a new policy to fund a major charitable project, life insurance offers a unique way to leverage relatively modest annual payments into a sizable charitable gift. 

Methods for Transferring Life Insurance to Children's Home

 There are four basic methods to benefit our kids using life insurance:  

1. Name Children's Home as your successor beneficiary. For example, you own a policy and have named your spouse as the beneficiary. You could name Children's Home as successor beneficiary in the event that your spouse predeceases you. There are no immediate tax benefits, but if no successor beneficiary were named, the death benefit would be included in your taxable estate. 

2. Name Children's Home as your primary beneficiary. For example, if you purchased a policy several years ago but your chosen beneficiary no longer needs the protection, you can designate that Children's Home receive the benefit. Once again, your estate would receive a charitable deduction and the death benefit would pass to charity tax-free. 

3. You can donate an existing policy to Children's Home. If you have older insurance policies which you no longer need and would like a current income tax deduction, you can donate these contracts to Children's Home. As long as all of the rights of ownership are completely transferred to Children's Home, you receive a current income tax deduction equal to the lesser of your cost basis or the fair market value of the policy (roughly equal to the cash surrender value.) 

Examples of policies which are often no longer needed:

• Business insurance after the business has been sold

• Income replacement insurance after you've retired

• Estate insurance when your estate has been reduced below the taxable level  

• Mortgage insurance after the mortgage has been repaid

4. You can give a new policy to Children's Home. Many donors would like to make a significant contribution to our mission but simply don’t have the available funds. If you transfer a newer insurance policy, or even purchase a new policy on your life and name Children's Home as owner, you can achieve your philanthropic goals.

For example, you allow Children's Home to purchase a $100,000 policy on your life and every year, you donate sufficient funds to the Children's Home to pay the annual premiums. With this planning, you guarantee that Children's Home will receive a sizable donation, whether you pass away 10 years from now or live to be 100. By using life insurance, you limit your current outlay to a small deductible annual gift. You can even leverage this current gift further, by donating highly appreciated assets, such stocks or mutual funds, to pay these premiums. You still receive an income tax deduction for the gift, and the charity can sell these assets without paying capital gains taxes.

Of course, all financial decisions should be discussed with your legal and tax advisors.