Life insurance: A great gift from a tax perspective

Aug 03, 2011

Donating a life insurance policy can provide tremendous benefits to one's taxes.

Life insurance doesn't always have to be in the interest of the purchaser to provide personal benefit. Issuing a policy for a charity not only acts as a generous gift to the community, but will eventually help the provider's finances in great ways as well.

Since life insurance firms aim to provide huge death benefits at disproportionately low premium costs, it allows people to present gifts that are much larger than the influence on their wallets, and in turn produce incredible tax benefits.

"Depending on how the gift is structured, you may be able to take an income tax deduction equal to your basis in the policy or its fair market value," according to The Des Moines Register.

The tax perks of giving to charity may also suggest buying more reassuring long-term policies for personal use that users can then donate at any time if they no longer require the coverage. Donations, then, are a resourceful way of converting unneeded insurance into write-offs for purposes more relevant to their lives.

Using charity for tax deductions, however, requires an unconditional attention at documentation - especially with products as complex as life insurance. As the case with clothing, "no receipt means no deduction if you get audited," explains MSN Money. Keeping records will ensure generosity is reciprocated.
 

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