If you own a life insurance policy that no longer serves the purpose for which it was purchased, and you don’t wish to lose its value by allowing it to lapse, you may wish to consider donating the life insurance policy to Way to Grow in return for a tax deduction in the year of the gift. You receive the satisfaction of supporting children and families while removing an unneeded asset from your estate.
How does this work? First, you may contribute an existing life insurance policy by assigning all incidents of ownership to Way to Grow by naming Way to Grow both as owner and beneficiary of the policy. In this instance, you transfer ownership of the policy to Way to Grow and receive a tax deduction for the value of the policy (typically determined to be the greater of the interpolated terminal reserve (ITR) value or premiums plus earnings less reasonable costs (PERC) value).
Second, you may apply for a new policy on your own life, with Way to Grow named as the original policy owner and beneficiary, subject to state insurance interest laws.
In both cases, gifts of life insurance policies are accepted if Way to Grow is named both owner and beneficiary of 100% of the policy. If premiums are ongoing, the donor agrees to cover the annual premiums and receives a tax deduction for premiums paid. Such policies may also be converted to paid up status by reducing the value of the future death benefit.
Third, a donor may name Way to Grow as beneficiary of an existing life insurance policy that he or she continues to own. Because it remains a revocable gift, neither the policy value nor premiums are tax deductible, but Way to Grow will be thankful to be included for a future gift.
For more information, please contact Kim Bowman at 612.874.4740.