Life insurance companies place very few restrictions on who may be named the beneficiary of a policy. This decision rests solely on the owner of the policy. You can give your money to anyone or any entity. Life Insurance is not part of the insured donors probate estate, which means that this GIFT cannot be contested by debtors, disgruntled heirs or by the IRS. You can give this gift to your loved ones, a church or charity, a trust, your business partners or yourself.
Protecting your loved ones is the primary reason life insurance policies are purchased. It can provide a cash benefit to your family if you die prematurely of unexpectedly. This cash benefit or death benefit is used primarily for the final expenses of the deceased, to pay off debts, for future living expenses, to fund your children’s educations and/or weddings, and it can be used to leave behind an inheritance. Purchasing life insurance is a way of placing value on your life and that of your family, and because beneficiaries pay no federal income taxes on life insurance proceeds, it can powerfully impact your family’s long term financial security.
But what else can it be used for?
Your church has been an integral part of your life and your community. A community of friends that help support each other in countless ways. Donating your time by organizing food drives for the needy, toy drives for the children and beautifying a local park makes you feel good inside spiritually, mentally and physically. By gifting life insurance, you can contribute far more than might otherwise be possible. It’s a way to continue your stewardship and make a difference even after you’re gone. Making a gift of life insurance to your church or a charitable organization for that matter, offers a number of important benefits. You create a legacy for the congregation you love. You receive a possible income tax deduction for paying the annual premium if you name the church or charity the owner of the policy. You church or charity receives the benefit and can continue to help your friends, neighbors and those in need.
Gifting life insurance helps you achieve your charitable goals today while creating a legacy for the future.
What if the beneficiary of a life insurance policy is a minor child who lacks the financial sophistication to handle a large amount of money? When minor children are involved, a Trust is often a good idea. A trust can easily be named as the beneficiary of life insurance proceeds. You can structure the terms of the trust to provide for your children in the manner and timeframe that you think best. The trustee acts as the manager of the trust and has the fiduciary responsibility to oversee the cash benefit. This responsibility may include, per your wishes, handling the funeral expenses, investing some of the proceeds in the stock market on the child’s behalf, paying off certain debts, and in the end giving a final payment to the child once a certain age has been met.
Life insurance can designate businesses as beneficiaries. If you own a business, for instance, life insurance can play a key role in a business continuation plan. A carefully written plan can protect your business should you or other crucial employees die prematurely. Funding a buy/sell agreement with either term or whole life insurance allows the partners or shareholders to purchase the deceased owners share in the company which can help the business continue to thrive.
Don’t forget about yourself. Many life insurance policies provide features that can offer benefits while you are still living. Certain policies can be structured to provide a tax-advantaged accumulation of cash value for loans or withdrawals to meet estate planning, wealth transfer or retirement planning needs. Some policies can simply provide a monthly income stream during retirement. Planning the future of your life ought to provide benefits in the event you should you become chronically ill (long-term care rider) or disabled (waiver of premium and/or disability rider).
More than ever, Americans of all ages need help in meeting vital protection and retirement needs. Life insurance goes well beyond family protection. Life insurance is a gift that can be given to someone, an entity or yourself. The security you will feel knowing that those you care about will receive this gift is a very comforting feeling.