Your Complete Guide to Charitable Life Insurance

Life insurance¹ can be a powerful and accessible way to support the causes you care about, long after you're gone. 

By integrating charitable giving into your legacy planning, you can create a lasting impact while also supporting your financial goals. Amalgamated Bank offers access to financial professionals who can provide values-aligned guidance to help you build a legacy that reflects who you are and what you stand for.

What Is Charitable Life Insurance?

Charitable life insurance is a strategy that allows a donor to make a significant donation to a charity, often at a cost that's only a fraction of the final gift amount. Donors can name a charity as a beneficiary, transfer policy ownership, or buy a new policy; each option offers varying levels of control, flexibility, and tax benefits.²

Ways To Donate Life Insurance

You have three primary options, all of which should be discussed with your financial advisor before you take the next steps. 

Option 1: Donate an Existing Life Insurance Policy	Option 2: Name a Charity as a Beneficiary	Option 3: Set Up a New Policy for Charitable Giving
You can transfer the ownership of an existing policy that you no longer need. You may be eligible to receive a tax deduction or credit for the cash surrender value and for future premiums paid.	You can keep ownership of the policy. However, you designate a charity to receive all or part of the proceeds upon death.	Take out a new policy, naming the charity as owner and beneficiary. The annual premium payments made qualify as charitable donations, which may make you eligible to receive a tax deduction or credit.

Why Donate Life Insurance to Charity?

One of the key reasons you would donate life insurance to charity is that you may be able to create a large legacy for a relatively small cost. Whether you want to raise funds to find medical solutions, improve the quality of educational services, or protect the environment, a life insurance charity strategy can have a major impact. However, there are also financial advantages. 

The Financial Benefits of a Life Insurance Donation

When it comes to the financial perks of life insurance philanthropy, tax advantages are among the most significant.

Here are some reasons why:

• If you transfer ownership of an existing paid-up policy to a charity, you may be eligible to receive a tax deduction or credit. This option is ideal when you're seeking immediate tax relief. 
• Once a charity is named as the owner and beneficiary, payments are treated as charitable donations, which means you may be eligible to receive an annual tax deduction or credit. This option allows you to leverage a small annual payment into a potentially larger death benefit, subject to policy terms, conditions, and the insurer’s ability to pay claims. 
• When you name a charity as the beneficiary of a policy (while retaining ownership), you may be eligible to receive a tax credit for your estate that offsets final tax liabilities. There is no immediate tax deduction or deductions for premiums paid during your lifetime. Instead, a tax credit is issued at death, which helps leave more of your remaining assets for your family. 

Life Insurance Donation Strategies for Legacy Planning

Choosing the Right Charitable Giving Approach 

When planning your legacy, what makes the most sense in terms of your financial goals and life's values?

Consider the following:

• When choosing a charity that means something to you, ensure it is a 501(c)(3) organization and accepts life insurance donations. 
• Once you transfer ownership, that decision is final. You cannot change the beneficiary later. In contrast, naming a charity as a beneficiary allows for flexibility. 
• There are different policy types. Permanent life insurance tends to be best for creating a lasting, guaranteed legacy. 
• The estate size matters. For estates with non-liquid assets, life insurance provides liquidity for the estate while leaving a charitable gift. 

It is recommended that you speak with a financial advisor to ensure your strategy matches your goals. 

Aligning With Personal Investing and Financial Planning 

Charitable life insurance offers a powerful, tax-efficient method to align personal investment goals with philanthropic legacy planning. 

For example:

• Stay mindful of state equalization. If you plan to leave a large non-liquid asset (such as real estate or a business) to a charity, life insurance may provide income tax-free death benefits under current law to your heirs. The benefit here is equal value distribution without forcing the sale of assets — often mitigating family disputes.
• For wealth transfer purposes, life insurance proceeds generally pass outside of probate, depending on policy structure and applicable state law. Any death benefits pass directly to the charity, avoiding probate delays and legal fees and may provide income tax-free death benefits under current law.
• Integration considerations are essential, as life insurance charity strategies should align with broader estate planning to optimize tax outcomes. Speak with a professional financial advisor before making any major decisions. 

Charitable Life Insurance FAQs

How does life insurance support charitable giving?

Life insurance is a tax-efficient tool for charitable giving, as it allows donors to give a legacy gift that may not be possible otherwise. Those who would like to make a difference can increase gift value by leveraging small, manageable premium payments. These modest payments can turn into a much larger death benefit for the charity. 

Can you make changes to life insurance and legacy plans? 

Yes, review your coverage periodically and make updates as new life events unfold. Circumstances may have changed, and now, more or less coverage is appropriate. There may be new products that provide the same benefits at a cheaper cost or provide benefits that were not available when you originally purchased the policy. However, the ability to make changes depends on the type of policy, the terms of your legal documents, and whether beneficiaries are designated as revocable or irrevocable.

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