If you have a permanent life insurance policy that you no longer need and are philanthropically inclined you might consider donating the policy to your favorite charitable cause. The most tax efficient way to accomplish this is to transfer the policy to the charity so that they then become both the owner and the beneficiary. Any cash value on the policy would be available to the charitable organization for their use in the form of loans and the death benefit would be paid to them upon the death of the insured. The original policy owner can receive a tax deduction for the gift as well as ongoing deductions if they continue to pay the policy premiums. The rules regarding the amount of the tax deductions available are complicated and a tax accountant should be consulted before moving ahead.
A more straightforward and flexible option is to retain ownership of the policy but change the beneficiary on the policy to the chosen charitable organization. Retaining ownership provides more control should you change your mind about the beneficiary or wish to split the policy proceeds between two or more beneficiaries. This method does provide an estate-tax deduction at the owner’s death but no deductions before that time. Another downside for some, while maintaining control of the policy, the owner doesn’t have the enjoyment of seeing their gift utilized during their lifetime.
These are just a couple of possibilities for using life insurance policies for charitable giving. A conversation with your tax advisor should be the first step if you are considering using your policies in this way.