Life Insurance in a Gift Plan

Life insurance is a valuable gift option that is often overlooked. Life insurance is frequently purchased as part of an overall financial or estate plan. As circumstances in life change, the need for insurance may diminish. A gift of a paid-up policy can provide tremendous benefits to the Marriott School.

The typical donor:

  • Needs assets available during life
  • Has paid into the policy for several years
  • Wants to insure completion of a significant gift
  • Uses the gift of insurance as part of an overall financial plan

Gifts features and benefits:

  • Immediate income tax deduction available to 50 percent of adjusted gross income
  • Flexibility in completing various giving plans

How Do I Make a Gift of a Life Insurance Policy with Cash Value?

To transfer ownership of an existing policy to the Marriott School, obtain a “change of ownership and beneficiary” form from your agent or insurance company. You should complete those portions of the form pertaining to “change of ownership” and “beneficiary designation.” The correct name of the Marriott School must be used (contact LDS Foundations for this information). The appropriate form and a copy of the policy should then be transferred to LDS Foundation in behalf of the Marriott School. The receiving institution must sign the “change of ownership” form as the new owner. If the policy is not “paid up,” future premiums are treated as cash gifts to the Marriott School.

If your are considering a new policy as a gift to the Marriott School, contact an LDS Foundation professional. Each state has different requirements regarding “insurable interests” associated with the right of the charitable recipient to purchase a policy on your life. Some states require that you initiate the policy with a minimum premium payment before you can transfer the policy to the Marriott School.

How Do I Make a Gift of Life Insurance Using Gift Planning Tools?

A common use of life insurance is to create an “irrevocable life insurance trust” (ILIT) to use in conjunction with the creation of a Charitable Remainder Unitrust. Using this concept, an asset such as raw land is transferred to a charitable remainder trust, sold in the tax-free environment of the trust and reinvested. Income is paid to you, and you “gift” some portion of the income to an irrevocable insurance trust which is owned by your heirs. At your death, the unitrust corpus will go to the Marriott School and the life insurance in the insurance trust is available for your heirs free of estate and income tax. Charitable planning using these concepts should be undertaken only with the advice and counsel of your financial and legal professionals. LDS Foundation’s professional staff will be happy to work with your advisors to help you achieve your charitable goals.

Other Facts You Should Know about a Gift of Life Insurance with Cash Value

Two forms of life insurance are typically donated: paid-up “whole life” and “universal life.” A whole life policy usually has cash value that may be used for the immediate needs of the Marriott School. Universal life policies can usually be structured so that premiums will not need to be paid after a period of years.

The charitable income tax deduction for a partially paid-up policy is based on the “interpolated terminal reserve” (ITR) and not the policy’s cash value. Use of the ITR for gift valuation purposes is an Internal Revenue Service regulatory requirement. The ITR value is an amount that reflects the daily current value of the policy and is slightly more than the cash surrender value (the amount the insured would receive) if the policy were cashed-in to the insurance company.