The Columbus Foundation is a
501(c)(3) tax-exempt charitable
organization; donors are eligible
for a charitable tax deduction for
their gifts.
By naming the Foundation as
beneficiary, you retain ownership
of the policy and have access to the cash value as well as the right to change the beneficiary.
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Many people purchase life insurance when they need protection for their family, for their business, or for their estate. In later years, they may find that
they don’t need all the insurance they did when they were younger. They may have built an estate of other assets or their children are self-supporting. Lower levels of personal and mortgage debt as well as the reduced impact of estate taxes have also lessened some individuals’ need for life insurance. As a result, it may become desirable for these individuals to use their policies for charitable giving.
The Columbus Foundation as Owner and Beneficiary
If you are a donor who wants to achieve immediate tax benefits, you should consider irrevocably assigning an insurance policy to The Columbus Foundation. You will be eligible for an immediate federal income tax
charitable deduction in the year of the assignment. For gifts of a policy that is paid up, the value of the deduction is equal to the lesser of the policy’s replacement value or the cost basis (the net premiums paid). If the policy is
not yet paid up, an income tax deduction is allowed for the lesser of the value determined under a special IRS definition or the cost basis of the policy, as well as for contributions made to The Columbus Foundation to pay subsequent premiums. Not only are you eligible for an immediate tax deduction and substantial estate tax savings later, but you also have the satisfaction of supporting your charitable interests. Any type of fund may be established with an insurance policy.
Life insurance enables you to make a much larger gift than you might have thought possible. A gift of insurance will not reduce your current stream of income.
Example: Bill Oliver purchased a $50,000 whole life policy years ago, to guarantee funds for his children’s education. His children have graduated and are now financially independent, yet Bill still owns the policy and pays the $1,000 annual premium. The policy’s value determined under the IRS definition is $23,000 and the policy’s cost basis equals $22,000. Bill decides to assign the policy to The Columbus Foundation, and he takes a $22,000 deduction. He realizes an immediate tax saving in his 29% bracket, of $6,380. In the coming years, Bill pays $1,000 annually to The Columbus Foundation,
which then pays the insurance premium. Bill is eligible to take a charitable tax deduction of $1,000 each year.
After Bill’s death, a permanent fund will be established in Bill’s name at The Columbus Foundation for the charities and causes he selects.
The Columbus Foundation as Primary or Contingent Beneficiary
Perhaps you want to help the community through The Columbus Foundation, but you are not ready to give up ownership of your life insurance. You may want access to the cash surrender value, or you may need the policy as
collateral. Instead of assigning the policy, you can name The Columbus Foundation as primary beneficiary of your insurance. Perhaps you would rather a member of your family remain the primary beneficiary. You can make
the Foundation contingent or successor beneficiary to receive the proceeds if your primary beneficiary predeceases you.
By naming the Foundation as beneficiary, you retain ownership of the policy and have access to the cash value as well as the right to change the beneficiary.
Since you retain ownership of the policy, there is no charitable deduction for the value of the policy upon designation of the charitable organization as beneficiary or for subsequent premium payments. However, any proceeds payable to The Columbus Foundation at your death will not be subject to federal estate tax.
The Columbus Foundation has sample standard legal language necessary to establish each type of fund through a gift of insurance. If you have any questions,
please contact The Columbus Foundation.
This organization is not engaged in rendering legal or tax advisory service. The purpose of this publication is to provide accurate and authoritative information of a general character only. Watch for tax revisions. State laws
govern wills, trusts, and charitable gifts made in a contractual agreement. For advice and assistance in specific cases, the services of an attorney or other professional advisor should be obtained.
Have any questions, contact a member of our Donor Services team at 614/251-4000 or by e-mail. |