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Life Insurance as a Gift

During this season of giving, you may want to donate more to your favorite charity but lack the funds to do so. Life insurance offers an affordable way to boost your charitable giving.

TAX BENEFITS

There are several ways to give life insurance charitably, some of which may offer tax advantages now or in the future. Talk with your accountant to understand how you can support a charity while gaining potential tax benefits.

CHARITABLE CHOICES

One option is naming a charity as your policy’s beneficiary. This removes the death benefit from your taxable estate while still allowing you to change beneficiaries later if your circumstances change.

Another option is a charitable rider, if your insurer offers one. This rider directs a set percentage of your death benefit to a designated charity, while the remainder goes to your primary beneficiaries. For example, a $500,000 policy with a 10% charitable rider would give $50,000 to the charity, with the rest going to your loved ones.

Ask your advisor which option fits best for your situation.

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January 2026 Client Profile

Robert and Linda, a married couple, want to reduce the size of their taxable estate while helping their family financially. They have three children and one grandchild. By using their annual gift tax exclusion, each spouse can give up to $19,000 per recipient in 2026 without triggering gift taxes.

Robert and Linda can each give $19,000 to all four family members, totaling $38,000 per person—or $152,000 tax-free for the year. These gifts can be made in cash, investments, or even directly paying for education or medical expenses.

By making these annual gifts, Robert and Linda gradually transfer wealth to their heirs while preserving their lifetime estate tax exemption. However, they must make the gifts by December 31 to take advantage of the current year’s exclusion, since any unused portion does not roll over.

Consistently applying this strategy each year can significantly minimize future estate taxes and ensure their assets are distributed according to their wishes.

Client Profile is based on a hypothetical situation. The solutions discussed may or may not be appropriate for you.