No matter what type of life insurance policy you have, you have an option to give some of your death benefit to a charity. There are a few ways you can ensure some of your policy proceeds support an institution you care about:
List the charitable organization as your beneficiary.
Add a charitable giving rider to your life insurance policy.
Put your policy in a trust.
Donate a permanent life insurance policy to the institution.
The best option for you depends on your overall estate plan. For most people, naming the charity as a beneficiary is the simplest option.
Naming a charity as your life insurance beneficiary
Your beneficiaries are the main reason you buy life insurance: The death benefit supports them financially when you're not around to provide for them anymore. But if your beneficiaries won't need the full benefit amount, you can set aside a portion for a charity.
Naming a charity as a life insurance beneficiary is simple: Write in the charity name and contact information when you choose or change your beneficiaries. You can name multiple beneficiaries and specify what percentage of the death benefit should go to each. So you can give 100% of your benefit to charity, 80% to your family and 20% to charity, or any other combination.
An alternative is to name a charity as a contingent beneficiary. If your primary beneficiaries can't accept the benefit, the charity would get your insurance payout.
There's no federal tax benefit or state tax benefit for naming a charity as your life insurance beneficiary, and you can’t write off your premium payments as a tax deduction. You can only claim a charitable deduction if a charity owns your policy and you pay the premiums.
Adding a charitable giving rider
Life insurance riders are additions that customize your life insurance policy. A charitable giving rider pays out an additional amount to the charity of your choice when you die. The donation doesn’t come out of the death benefit to your beneficiaries or increase your insurance premium.
There are some limitations. Not all life insurance companies offer charitable giving riders and those that do usually only offer them on high-value policies. The charity chosen has to be recognized by the IRS, usually a 501(c).
How to find an IRS-recognized charity
Some institutions that ask for donations are for-profit groups that you can't name on a charitable giving rider. The IRS considers the following to be recognized charities:
Religious organizations and places of worship
Literary and arts organizations, including museums and art galleries
Public charities (e.g. the American Cancer Society)
Private foundations (e.g. the Bill and Melinda Gates Foundation)
You can also search the IRS database to confirm that an organization appears in its records.
Religious institutions are tax-exempt, so they may not be registered with the IRS. You can still donate proceeds from your life insurance to a religious organization using any of the other methods outlined here.
Charitable giving through a trust
Putting your life insurance into a trust is useful if you want to have more control over how the money is spent after you die. A beneficiary can spend the death benefit however they want. If you put your policy into a trust, you can dictate how and when the money gets spent.
Setting up a trust is complex and should be done with the help of an estate planning attorney. You can set up your trust documents to specify where to donate, how much, and when once your life insurance money is in the trust.
Donating your permanent policy
Term life insurance policies are best for most people, but some people with more complex financial needs may get permanent life insurance policies.
You can gift an entire permanent life insurance policy to a charity while you’re still alive. When you transfer a policy to a charity, the charity becomes the owner and the beneficiary. It can then liquidate the policy and take its cash value or keep the policy going and grow the cash value.
If the policy stays active, you can continue to pay the premiums by paying them to the charity. Both these premiums and the policy are deductible on your income taxes. Work with your accountant or financial planner to ensure you're aware of all of the tax details.
It's possible to use your life insurance policy to support both your loved ones and an organization you care about. If you want to reserve some or all of your policy's death benefit for charitable giving, ask a Policygenius agent what the next steps are.
Frequently asked questions
Can you give your life insurance to a charity?
Yes, you can donate your policy proceeds to a charity. If you have permanent life insurance, you can donate your entire policy to a charity.
Are life insurance premiums tax deductible if the beneficiary is a charity?
Life insurance premiums are not tax deductible if you name a charitable organization as a beneficiary. Premiums may be deductible if you transfer policy ownership to the charity.
How do you give life insurance to a charity?
It's simplest to name a charity as a beneficiary on your policy. Other options include a charitable giving rider, donating a permanent policy, or charitable giving via a trust.