Life insurance is a great way to make a much larger gift
than many people would ever think possible. It can be an excellent investment
and can create substantial assets for the insured and for the beneficiaries.
By making a gift of life insurance to The Foundation for Democracy
in Africa (FDA), you help to secure the future of FDA programs.
US donors who irrevocably assign ownership and beneficial interest in
a policy to The FDA may also qualify for a charitable tax deduction.
Tax benefits
• The federal tax laws encourage charitable gifts of life insurance
by providing income and estate tax deductions. If you were to give The
FDA a paid-up policy, your income tax deduction would equal to either
the replacement value of the policy or your tax basis (premiums paid),
whichever is less. Your estate taxes will also be lower because your estate
is reduced by the value of the policy.
• If premiums remain to be paid, the deduction is then going to
equal either the interpolated terminal reserve value (cash value) plus
the proportionate part of the gross premium last paid, or your tax basis,
whichever is less. You may continue to pay the premiums directly to your
insurer; if you do, you will be entitled to a charitable contribution
(in the amount of these payments) up to 30 percent of your adjusted gross
income. That's because IRS will view your gift as being “for the
use of” the charity, rather than being “given to” the
charity.
• You may name The FDA as beneficiary of the policy. Such designations
are not irrevocable, so you will not be entitled to an income tax deduction.
At your death, however, your executor can take a federal estate tax deduction
for the entire amount of the gifted proceeds that would have been included
in your estate.
• If your employer provides a group term life insurance policy and
you feel you no longer need the protection it provides, you might consider
making The FDA the beneficiary. Under current tax law, you must include
the policy premiums in your annual income to the extent they are used
to purchase more than $50,000 in insurance (if you do not contribute the
premiums). If you donate the policy to
The FDA you no longer have to report such amounts as income. There is no income tax deduction in this instance; however, the proceeds of the policy are removed from your taxable estate at your death.
How to donate life insurance:
Paid-up policies. You may have a life insurance policy
that is no longer needed. You can name the hospital foundation of your
choice as the beneficiary and transfer ownership of the policy. Your charitable
deduction would be about equal to the policy cash value.
Not yet paid up policies. Your charitable deduction is
the approximate cash value and future premium payments on the policy.
The FDA may consider picking up the payments after discussing the gift
with the donor. The minimum face value of the policy in such a case would
need to be US$5,000.
Purchase a new policy to guarantee a pledge.
A policy benefiting The FDA but keeping access to the policy's
cash value. This is accomplished by simply naming The FDA as
the beneficiary of the policy. You maintain ownership and access to the
policy's cash value. The best language for the beneficiary designation
is "The Foundation for Democracy in Africa."
For further information, please contact our Washington DC office either
via mail at the address below or email (info@democracy-africa.org)
us.
The Foundation for Democracy in Africa
1612 K Street NW Suite 1104 Washington, DC 20006
U.S.A.
