How It Works
Option 1: Give your policy to Community Foundation Tampa Bay
When Community Foundation Tampa Bay becomes the owner of your policy we can cash it in and add the proceeds to your fund. Alternatively, if you continue to pay the premiums, we could maintain the policy until it ends and then receive the full death benefit amount for your fund. In addition to the satisfaction of making a generous gift of support through Community Foundation Tampa Bay with no immediate cost, you will receive an immediate income tax charitable deduction for the value of your policy (or the total premiums you have paid, whichever is less) and an additional income tax deduction if you continue to pay premiums.
In order to make your gift, you must assign Community Foundation Tampa Bay all ownership rights to your policy and make Community Foundation Tampa Bay the irrevocable designated beneficiary of the policy.
This can be easily accomplished by completing a simple form from your insurance company. Be sure to identify us as: Community Foundation of Tampa Bay, Inc., 4300 W. Cypress Street, Suite 700, Tampa FL 33607, Federal Tax Identification Number: 59-3001853 and specify the fund you want to benefit with your gift.
Example
Elanor Mahoney bought a $250,000 life insurance policy on her own life shortly after the birth of the first of her four children. They are now in their 40s and 50s and no longer need the financial protection the policy provides. The cash value of her policy is now over $90,000, and she’s paid a total of $75,000 in premiums over the years.
Elanor has enjoyed a relationship of many years with an early childhood literacy nonprofit, and would like to make a significant gift to it, but is reluctant to use her liquid assets. Elanor is delighted to learn that her insurance policy can be put to a new and productive use. She arranges with her insurance agent to donate her policy to the fund she sets up at Community Foundation Tampa Bay to support the nonprofit.
Benefits:
- Elanor’s gift will entitle her to an income tax charitable deduction for the lesser of the value of the policy or the total premiums paid, $75,000 in this example.
- She has the satisfaction of making a generous gift through Community Foundation Tampa Bay that will provide ongoing support to a cause that is important to her without affecting her current income.
- As the policy owner, Community Foundation Tampa Bay can either cash in the policy and have $90,000 to work with immediately or, if Elanor continues to pay premiums, hold the policy and receive $250,000 as a legacy gift for Elanor's fund.
Option 2: Designate Community Foundation Tampa Bay as a beneficiary of your policy
You can designate your fund at Community Foundation Tampa Bay to receive some or all of your policy’s death benefit but retain ownership of the policy. You will have the satisfaction of making a generous gift through Community Foundation Tampa Bay with no immediate cost to you.
This option allows you to change your mind about your gift should circumstances in your life change. Because your gift is revocable, you do not receive an income tax charitable deduction for your gifts, but your estate will receive an estate tax deduction for the amount your policy distributes to us.
It is very easy to designate your fund at Community Foundation Tampa Bay as a beneficiary of your life insurance policy. Simply contact your insurance agent to make a change in your policy’s beneficiary designation. Be sure to identify us as: Community Foundation of Tampa Bay, Inc., 4300 W. Cypress Street, Suite 700, Tampa FL 33607, Federal Tax Identification Number: 59-3001853 and include the name of your fund.
Other considerations
Loans against your policy can create taxable income
If you give a life insurance policy on which you have an outstanding unpaid loan, you may have to declare a portion of the loan as taxable income. Check with your financial advisor; it may be best to pay off the loan prior to making your gift. If you plan to designate a fund at Community Foundation Tampa Bay as a beneficiary of your policy (Option 2), an unpaid loan against your policy will not affect your tax picture.
Give a paid-up life insurance policy
Sometimes a life insurance policy may be “paid-up” which means it will stay active without any additional premium payments. A paid-up life insurance policy is a valuable asset and makes an excellent gift.
Some states do not allow you to give a life insurance policy to a charity
For your gift of life insurance to be valid, your state of residence must consider a charity to have an “insurable interest” in your policy. Most states do but verify that this is true in your state before you make your gift.
