Your life insurance may have a new purpose to serve
You may have purchased a life insurance policy years ago when you wanted to protect your family from financial hardship in the unlikely case of untimely circumstances. Now that your children are grown and independent, your mortgage is paid off, and you have accumulated sufficient assets in your estate to pass on to your family, you may no longer need your life insurance policy for its financial protection.
If this is your situation, consider making a gift of your life insurance policy to Mount Holyoke College. The value of your policy can provide generous support to our students at no out-of-pocket cost to you.
Give a paid-up life insurance policy
A paid-up life insurance policy is a policy that will stay in force without any additional premium payments. A paid-up life insurance policy is a valuable asset and makes an excellent gift.
When you give your paid-up insurance policy to us, we will either cash in the policy immediately and use the proceeds, or maintain the policy until maturity and receive the death benefit of the policy.
Because your gift is irrevocable, you will receive an income tax charitable deduction for the value of your gift at the time you transfer your policy to us. You will also remove your insurance from your estate, potentially saving estate taxes, as well.
In order to make your gift, you must assign Mount Holyoke all ownership rights to your policy and make Mount Holyoke the irrevocable designated beneficiary of the policy. Usually this can be accomplished by completing a simple form from your insurance provider. All gifts of life insurance policies must be reviewed by the gift acceptance committee. Please contact us if you are interested in this option.
Make Mount Holyoke a designated beneficiary of your policy
Another great way to make a gift to us with your life insurance policy is to make Mount Holyoke a designated beneficiary of your policy. When your insurance reaches maturity, we will receive the amount or proportion you designate. You can change your designation at any time, giving you the flexibility to revise your gift for any reason.
Because this kind of gift is irrevocable, you will receive an income tax charitable deduction for the value of your gift at the time you transfer your policy to us, providing tax savings if you itemize. You will also remove your insurance from your estate, potentially saving estate taxes, as well.
It is very easy to make Mount Holyoke a designated beneficiary of your life insurance policy. Simply contact your insurance agent to make a change on your policy's designation form. Be sure to identify us as: The Trustees of Mount Holyoke College, Tax ID# 04-2103578
Loan against policy will create taxable income
If you give a life insurance policy on which you have an outstanding unpaid loan, you will be considered to have sold your policy for the amount of the unpaid loan. As a result, you will have to declare a portion of the loan as taxable income. You may want to pay off your loan prior to your gift in this case.
If you plan to designate Mount Holyoke as a revocable beneficiary of your policy, the existence of an unpaid loan against your policy will not affect your tax picture.
A few states will not allow you to give life insurance 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.
Karen '65 bought a $250,000 life insurance policy on her own life shortly after the birth of the first of her four children. Her policy has been paid-up for years and her children, who are now adults, no longer need the financial protection the policy provides. The cash value of her policy is now over $90,000 and she's paid $75,000 in premiums.
Karen cherishes her Mount Holyoke experience, and would like to honor their relationship with a significant gift. However, she has been reluctant to use her liquid assets to make the gift. When Karen learns that her policy can be put to a new and productive use, she is delighted. After consulting with the College, she arranges with her insurance agent to donate her policy.
- Karen will earn an immediate income tax charitable deduction of approximately $90,000, providing tax savings if she itemizes.
- Her $250,000 death benefit will not be included in her estate.
- She has the satisfaction of making a generous gift to Mount Holyoke without reducing her income level.
- As the policy owner, Mount Holyoke can either cash in the policy and have over $90,000 to work with immediately, or hold the policy and receive $250,000 as a legacy gift from Karen.