You have many options when it comes to deciding to whom you would like to leave your life insurance benefits. Before naming a beneficiary, consider this:
Why Some Choose to Donate Life Insurance Benefits
Donating your life insurance benefits to a school or non-profit not only comes with a great deal of pride it can also provide valuable tax deductions. By gifting your life insurance benefit you can greatly reduce your taxable estate, saving higher-income individuals thousands in estate taxes. Additionally, donating your life insurance benefits can provide income tax deductions, during your lifetime, on the fair market value of your policy.
How it Works
If you choose to use your donation as a tax deduction you will need to work with the organization’s alumni association or treasury department. In order to make your contribution you will have to name the organization as the policy owner, premium payer and beneficiary. In doing so you are agreeing to make a yearly, deductable contribution equal to that of your annual premium payment. The organization is then the legal beneficiary of your policy at the time of your death. If you decide to so you will need to gather documentation detailing all previous donations you’ve made to that particular organization. Most life insurance companies will accept your request to name a non-traditional beneficiary assuming your death benefit is proportional to your previous donations.
Whether you choose to leave your life insurance benefits to family and friends or a worthy cause, it’s important to clearly define your wishes when you’re healthy and able. Such legal documentation can only be executed when you are of sound mind and body. It’s up to you to get the wheels in motion today. Don’t leave such an important decision to chance, make your wishes known.
Protect Those You Love First
It’s important to first ensure that your loved ones are protected. Before making any final decision about the disbursement of your life insurance benefits, take a close look at your current financial situation. Will your family be financially stable if you are no longer able to provide? How would they be taxed if they were to receive your life insurance benefits? Consider each carefully and make sure your decision is in the best interest of all involved parties.
As you explore your options, don’t hesitate to contact the experts at IntelliQuote. We’re here to help you understand your options. If you would like more tips and information on life insurance benefits and estate planning we encourage you to follow our blog. Check out these recent posts:
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