Plan Your Legacy

Plan Your Legacy Life Insurance Policies

Life insurance can be a valuable tool in estate planning. A beneficiary named on a policy, whether an individual or an organization, can receive the proceeds directly without having to go through the probate process. Another option is to make the proceeds payable to your estate so it can be included in the total when specific or percentage bequests are made.

Life insurance also offers a wonderful way to make a charitable gift. The following are just a few examples of how easily this can be accomplished:

Paid-up Policies Example: Show more

Mr. and Mrs. F. purchased life insurance policies at the birth of each of their children as a means of ensuring that there would be funds for the children’s college educations if they should die before the children graduated.

The children have now graduated, the policies are paid up and Mr. and Mrs. F. no longer need the extra coverage. Together, the policies have a cash replacement value of $60,000. The couple donates the policies to the Truman Library Institute and is allowed a charitable income tax deduction for the full cash replacement value.

Policies with Premiums Due Example: Show more

Ms. G. purchased a policy on her life when her older brother was diagnosed with a terminal disease, so there would be money available for his care if something should happen to her. When her brother died, Ms. G. offered the policy to the Truman Library Institute, even though there were still premiums to be paid. The Truman Library Institute accepted an irrevocable assignment of the policy and Ms. G. makes annual gifts to the organization, in addition to her usual contributions, equal to the premium payments.

The Truman Library Institute uses Ms. G.’s donations to pay the premiums. Ms. G. was able to take a charitable deduction for approximately the cash value of the policy in the year the gift was made. She also receives a charitable deduction for every gift she makes to the Truman Library Institute to pay future premiums.

Making a Gift While keeping the Right to a Policy’s Cash Value Example: Show more

Mr. H. purchased a policy on his life many years ago. He would like to give it to the Truman Library Institute but is afraid he may need access to the cash value in the future.

He has named the Truman Library Institute as the sole beneficiary of the policy but keeps the right to borrow on the policy or even cash it in. If the policy is undisturbed, the Truman Library Institute will benefit from his thoughtfulness.

Note: In the example above, the donor receives no immediate income tax charitable deduction, but if insurance proceeds are paid to the Truman Library Institute, they will qualify as an estate tax charitable deduction.