Charitable Gift Life Insurance

Definition of "Charitable gift life insurance"

Life insurance policy given by a donor to a charity; donor only relinquishes the cash value and the cost of the premiums previously paid. The receiving charity's future value of the life insurance policy is the death benefit. Since the charity is the owner of the policy, it can:

  1. borrow against the cash value;
  2. surrender the policy for its then cash value;
  3. utilize its conversion privileges..
The donor can enjoy an income tax deduction for the value of the life insurance policy contributed to a qualified charity, provided the donor does not retain any ownership rights to that policy. If the donor makes an irrevocable transfer of the life insurance policy to a qualified charity and all rights of ownership have been forfeited to the charity, the death benefit will not be included in the donor's estate, provided the donor survives for at least three years after the date of transfer.

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