Your life insurance may have a new purpose to serve
You may have purchased a life insurance policy years ago when you wanted to protect your family from financial hardship in case of your untimely passing. Now that your children are grown and independent, your mortgage is paid off, and you have accumulated sufficient assets in your estate to pass on to your family, you may no longer need your life insurance policy for its financial protection.
If this is your situation, consider making a gift of your life insurance policy to Skidmore College. The value of your policy can provide generous support to our mission without affecting your cash flow.
Give a paid-up life insurance policy
A paid-up life insurance policy is a policy that will stay in force without any additional premium payments. A paid-up life insurance policy is a valuable asset and makes an excellent gift.
When you give your paid-up insurance policy to us, we will either cash in the policy immediately and use the proceeds, or maintain the policy until maturity and receive the death benefit of the policy.
Because this kind of gift is irrevocable, you will receive an income tax charitable deduction for the value of your gift at the time you transfer your policy to us, providing tax savings if you itemize. You will also remove your insurance from your estate, potentially saving estate taxes, as well.
In order to make your gift, you must assign Skidmore College all ownership rights to your policy and make Skidmore College the irrevocable designated beneficiary of the policy. Usually this can be accomplished by completing a simple form from your insurance provider. Be sure to identify us as: Skidmore College, 815 North Broadway Saratoga Springs, NY 12866, Federal Tax Identification Number: 14-1338562.
Make Skidmore College a designated beneficiary of your policy
Another great way to make a gift to us with your life insurance policy is to make Skidmore College a designated beneficiary of your policy. When your insurance reaches maturity, we will receive the amount or proportion you designate. You can change your designation at any time, giving you the flexibility to revise your gift for any reason.
Because your gift is revocable, you do not receive an income tax charitable deduction at the time you create the designation. Rather, your estate will receive an estate tax deduction for the amount your insurance policy distributes to us if your estate is subject to tax.
It is very easy to make Skidmore College a designated beneficiary of your life insurance policy. Simply contact your insurance agent to make a change on your policy's beneficiary designation form. Be sure to identify us as: Skidmore College, 815 North Broadway Saratoga Springs, NY 12866, Federal Tax Identification Number: 14-1338562.
Loan against policy will create taxable income
If you give a life insurance policy on which you have an outstanding unpaid loan, you will be considered to have sold your policy for the amount of the unpaid loan. As a result, you will have to declare a portion of the loan as taxable income. You may want to pay off your loan prior to making your gift in this case.
If you plan to designate Skidmore as a revocable beneficiary of your policy, the existence of an unpaid loan against your policy will not affect your tax picture.
A few states will not allow you to give life insurance to a charity
For your gift of life insurance to be valid, your state of residence must consider a charity to have an "insurable interest" in your policy. Most states do, but verify that this is true in your state before you make your gift.
Leila Hanson bought a $250,000 life insurance policy on her own life shortly after the birth of the first of her four children. Her policy has been paid-up for years and her children, who are now in their 40s and 50s, no longer need the financial protection the policy provides. The cash value of her policy is now over $90,000, and she's paid $75,000 in premiums.
Leila has enjoyed a relationship of many years with Skidmore, and would like to honor their relationship with a significant gift. However, she has been reluctant to use her liquid assets to make the gift. When Leila learns that her policy can be put to a new and productive use, she is delighted. She arranges with her insurance agent to donate her policy.
- Leila will earn an immediate income tax charitable deduction of approximately $90,000, providing tax savings if she itemizes.
- Her $250,000 death benefit will not be included in her estate.
- She has the satisfaction of making a generous gift to Skidmore College without reducing her income level.
- As the policy owner, Skidmore can either cash in the policy and have over $90,000 to work with immediately, or hold the policy and receive $250,000 as a legacy gift from Leila.