The Tax Law of Charitable Giving, 5th Edition

Chapter SeventeenGifts of and Using Life Insurance

1. § 17.1 Introduction
2. § 17.2 Life Insurance Concepts
   1. (a) Basics
   2. (b) Types of Life Insurance
   3. (c) Valuation
3. § 17.3 Charitable Giving and Insurance
4. § 17.4 Insurable Interest
5. § 17.5 Unrelated Debt-Financed Income Considerations
6. § 17.6 Charitable Split-Dollar Insurance Plans
   1. (a) Plans in General
   2. (b) Charitable Deduction Denial Rules and Penalties
   3. (c) IRS Notice
7. § 17.7 Applicable Insurance Contract Reporting Requirements

Life insurance can be the subject of a charitable gift. It can be considered part of the panoply of planned gifts, although a split-interest trust is not usually involved. A gift of life insurance is a particularly good way for a younger donor to make a major gift to a charitable organization.

§ 17.1 Introduction

A person may make a gift of life insurance to a charitable organization. Where a federal income tax charitable contribution deduction is desired, the donor must make the charity the owner and beneficiary of the insurance policy.

An individual can contribute a fully paid-up life insurance policy or a single-premium policy to a charitable organization and deduct, for income tax purposes, its replacement value.¹ Alternatively, an individual can acquire a life insurance policy, contribute it to a charitable organization, pay the premiums, and create a charitable contribution deduction for each premium payment made.

For an income tax deduction for a gift of life insurance to be available, the insurance contract ...