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Life Settlements Can Enhance Charitable Contributions

The practice of donating a large life insurance policy to a charity is not new and is a vehicle that many wealthy seniors practice routinely. However, are they getting the best bang for their buck?

Normally, a person donates his policy and receives a deduction on his tax return for the cash value of the policy. Once the gift is given, the charity is now the owner and as such is obligated to pay the premiums.

Is there a better way? Yes, for people age 65 and older utilizing a Life Settlement can benefit both the individual and the charity. Instead of simply donating the policy, one can obtain a lump sum offer for the sale of the policy. If the offer is higher than the cash surrender value, the donor may then have an opportunity to take a larger tax deduction on his Federal income tax return. Then, once the policy is given to the charity, it can immediately sell the policy for the appraised amount in exchange for a lump sum of cash.

The donor may be allowed to take a larger deduction for his gift, and the charity gets immediate cash without the burden of having to keep up with premiums or having to wait for the donor to pass away before collecting their money.

The charitable entities that have had policies donated to them in the past can also benefit from utilizing a life settlement. By converting qualified policies into cash, charities will automatically eliminate any future premium expense obligations and have the benefit of immediate liquidity for today’s needs.

Note: Tax obligations will vary with the sale of an insurance policy, and Colonial Settlement Partners encourages you to consult with your attorney, financial planner or tax advisor as it relates to your specific situation.

Curious to see how much your life settlement is worth? Contact us today and discuss getting free quote!