Gifts of Life Insurance
One of the simplest forms of making a gift is to designate FAIR as either the beneficiary or the owner of a life insurance policy. Sometimes people own life insurance policies that are no longer needed for their original purpose. In those cases, a person can choose to designate FAIR as the beneficiary, and FAIR will receive the face amount of the policy when the donor dies.
Making FAIR the ”owner” instead of the beneficiary of a life insurance policy has some tax advantages for the donor that simply designating FAIR a “beneficiary” does not. When FAIR is made the owner of the policy, both its current cash value and any future premium payments that may be due for the policy are considered tax-deductible contributions by the donor. The disadvantage is that once FAIR becomes the owner of an insurance policy, as opposed to being designated a beneficiary, the decision cannot be changed without FAIR’s consent.
| Example Mr. and Mrs. Arnold purchased a $250,000 life insurance policy on Mr. Arnold’s life in 1975. Their advisors recently informed them they can no longer expect to owe estate taxes, so the Arnolds decide to change the policy beneficiary to provide that $25,000 from the proceeds be designated as a memorial gift in honor of Mr. Arnold’s parents. The remaining $225,000 is to be paid to the Arnold’s grandchildren in equal shares. |