You Can Donate Your Whole or Universal Life-insurance Policy to the PCCA
There are basically two ways to donate a life insurance policy:
1. You can transfer ownership of the insurance policy to The PCCA.
In this scenario, our charity will be the owner and beneficiary of the policy. We can then work with you to decide whether or not to maintain the policy or to liquidate it. If we maintain the policy, you will also have the option to continue paying the premiums or not. This may not seem intuitively a beneficial arrangement except that donors who give a policy to The PCCA are eligible for a charitable deduction not only for the policy itself but also for any premiums you pay to maintain the policy after the charity takes ownership.
For the policy itself, you can typically claim a deduction for the lesser of two valuations: 1) the policy’s fair market value or 2) the donor’s “basis,” which is can be calculated as the accumulated premiums paid by you, the donor up to the date of transfer minus any dividends and withdrawals you have received. Any loan outstanding against the policy is counted against the deduction. It is always best for you to consult with your accountant and/or tax advisor to fully understand the benefits and implications of your donation.
2. You can name The PCCA as the beneficiary while maintaining ownership of the policy. In this scenario, if there is cash value in the policy, you retain access to that value while alive; for example, in case it’s needed for living expenses.
Depending on financial standing, a primary drawback to this is that although retention of ownership will allow you to stay in control of your policy and receive an estate-tax deduction when you die, you will be denied the real-time income-tax deduction that you would earn by donating the policy to The PCCA . . . and, correspondingly, you won’t see the fruits of your donation while you are alive.
For more information, please complete the following information request form: