If you had a life insurance policy that you no longer needed, what would you do with it? Would you donate it or encash it? It is a debatable decision. In case if you choose to donate it, would it be to a charitable organization or to your university?
If you decide to donate it to a charity, then you have two options. First is that you can name the charity as your beneficiary and when you die, all the proceeds will go to the charity. Secondly, you can transfer the policy in the name of the charity while you are alive.
The advantage of naming a charity as your beneficiary is that it allows you to borrow money against the policy and withdraw cash in case of requirement. However, the amount will be deducted in the value of the donation. In addition, you can change the beneficiary or cash out whenever you want.
Donating your life insurance to charity gives you various tax benefits. It helps people in need and allows you the control of your cash.
Different strategies can be implemented to donate to charity. This can result in more estate and income tax benefits:
- Lifetime gift
- Gift by will
- Charitable trust
- Private foundation
However, there are some problems with the donor’s motive, tax ramifications, and so on.
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Donations made to colleges are of great help in raising funds for the institute. For those who want no credit due to shyness or judgment by family members and society, donating via life insurance makes perfect sense. It is not involved in the probate process and holds no public record.
Making your alma mater your policy beneficiary has various advantages as follows:
- It is possible to donate more than you can at the present.
- You have access to all the policy features until you are alive.
- You have the freedom to change the university or number of beneficiaries whenever you want.
However, there are no tax benefits for this kind of a donation. In addition, the college will not get your gift until your death.
Alternately, you can choose to receive annual dividends through your whole life policy and donate that cash to a charity or college.
In case you have a policy that is completely paid up, then you can donate to the college and gain tax benefits. However, this type of donation would be irreversible. This type of policy is also a good way for parents to plan and save money for the children’s tuition.
Donating your money is a big deal. However, when you are making this decision, ensure that you have weighed in all the pros and cons and that you make a well-informed decision. Consult a financial advisor and double-check your financial conditions before making a donation. Whether you choose a charity or a college is a decision you have to make after doing your homework well in detail. A donation is a very large-hearted step that could improve someone’s future.
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