Charity can begin with the gift of life insurance

Almost everywhere, individuals and business sectors are feeling the strain of these tough economic times.

And it stands to reason when corporate and personal budgets are tight, donations to charities and nonprofit groups suffer. In fact, a survey of the United Way’s largest chapters projects donations this year will decline 2 percent to 5.6 percent, according to money.cnn.com.

But, even now, regardless of your income level, you can continue to support your favorite philanthropic organizations by donating through life insurance. When you name your chosen qualified charity as the beneficiary of your policy, you are contributing to a worthy cause and can benefit from potential tax deductions. There are several methods of gifting life insurance as a charitable donation:

• Designate a charity as owner and beneficiary. This benefits the charity and gives the donor a bonus in the form of income tax benefits. Premiums on such a policy are deductible to taxpayers who itemize their deductions. Consult a tax professional for details.

• Designate charity as beneficiary. As policyowner, you retain the right to make changes to the policy including changing the beneficiary. While premium payments are not tax deductible, upon the donor’s death, the estate receives a charitable estate tax deduction for the proceeds, as allowed by law.

• Donate an existing policy. If you own a policy with coverage that is no longer needed, you may consider donating it to a charity. The donor could irrevocably assign or transfer the policy to a charity as owner and beneficiary. This gift is generally not subject to gift tax, and, in most cases, may be eligible for a charitable income tax deduction.

• Create a charitable remainder trust. This is a complex planning option for donors with unproductive appreciated assets, such as real estate. This transaction can be structured to benefit the donor, heirs and charity. Consult an attorney or accountant for advice.

Even in a challenging economy, with a little foresight and creativity, you can continue to support worthwhile endeavors and gain satisfaction in knowing you’ll be able to contribute for the long term.

Judy King works for New York Life Insurance Co. She can be contacted at 907-279-6471 or e-mail: jiking@ft.newyorklife.com.