Creating a charitable gift-giving strategy

Creating a charitable gift-giving strategy

Many people have a financial goal to use their money to leave the world a better place after they’re gone. Charitable giving represents a passion that often helps benefit a charitable organization, not-for-profit cause, religious organization, alma mater, research foundation and more.

Charitable giving has tax advantages

Charitable giving can be a key part of a well-planned estate, and the federal government offers generous tax incentives for individuals who make charitable gifts.

Working with your financial professional and a tax advisor are highly recommended to ensure your charitable giving plan meets your wishes in the most efficient way possible.

While there are many ways to incorporate charitable giving into your estate plan, using life insurance can often be one of the best ways to simplify and maximize your giving.

Maximize your gift-giving power with life insurance

Life insurance can provide far more for your favorite charity than you might think possible.

Here are two options to consider.

  1. Name a charity the full or partial beneficiary of a life insurance policy that you own. There are no income tax benefits to naming the charity as beneficiary, but if you have a taxable estate, it could create estate tax savings for your heirs.
  2. Make a charity the owner (and beneficiary) of a life insurance policy on your life. Depending on your tax situation, you may be entitled to income tax savings for cash gifts made to the charity to pay policy premiums.

Gift-giving with a new life insurance policy

Many uses of life insurance as part of a charitable giving plan involve a newly purchased policy, subject to underwriting. For example, underwriting typically requires a history of giving to the particular charity.

If a qualifying charity owns the policy and you itemize deductions, you may be entitled to a tax deduction for cash gifts made directly to the charity. The charitable organization then uses your contributions to pay the life insurance premiums each year.

For the best income tax result, give cash directly to the charity so the charity can make the premium payment. Be sure to get an acknowledgement of the gift for your records.

When a permanent policy is used, the policy can build cash value, which is available to the organization to use during your life. Upon your death, the policy death benefit is paid to your charitable organization. In making such a gift, you experience the joy of knowing that you have made a gift that will outlive you and that continues to support your chosen organization.

Gift-giving with an existing life insurance policy

If you own a life insurance policy you no longer need, consider naming your favorite charity as the new policyowner.

At the time of the gift, you may be eligible for an income tax deduction for the lesser of the fair market value of the policy or the donor's cost basis. Ongoing cash donations made directly to the charity may also be eligible for additional income tax savings.

(Note: Gifts of life insurance with outstanding loans can create adverse income tax consequences for the donor. Exercise care and work with your tax professional if you give a policy with outstanding loans to a charity.)

Benefits to your charitable organization

  • The charity will receive major gifts that help to build long-term goals
  • The charity will receive the policy proceeds promptly, free from taxes and estate costs
  • The charity can control the program (if you purchase a new policy) when the charity is both the policyowner and beneficiary
  • Depending on the product selected, a permanent policy can accumulate cash value that is accessible by the charity

Benefits to you

  • Make a substantial gift to the charity of your choice through potentially tax-deductible annual cash contributions made directly to the charity (assuming the charity owns the policy), which the charity can then use to pay policy premiums
  • Receive the satisfaction and recognition for major contributions during your lifetime
  • Create a significant new asset for your charitable institution
  • Be both an annual giver and an endowment creator

There are a number of options for you to use life insurance to make a difference, and they can vary in complexity and benefits to you.

Working with your Ohio National financial professional can make a difference for you and your intended charity because they can help translate your charitable goals into a strategy that best fits your wishes.

  

Charitable gifts are subject to charitable and itemized deduction limitations. Work with your tax professional to identify whether your gift qualifies for a deduction in your particular case.

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Products issued by The Ohio National Life Insurance Company and Ohio National Life Assurance Corporation. Registered products distributed by Ohio National Equities, Inc., Member FINRA. Product, product features and rider availability vary by state. Guarantees are based upon the claims-paying ability of the issuer. Issuers not licensed to conduct business in New York. Withdrawals and loans may reduce the death benefit, cash surrender value and any living benefit amount.

This provides general information that should not be construed as specific legal or tax advice nor the law of any particular state.  Please seek the advice of a qualified legal or tax professional for your specific situation.

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