Owners of a cash-value life insurance policy can gift the policy to a charity. For example, a donor can contribute $50,000 to a charity. If the donor has paid premiums of $20,000 for a policy that provides $50,000 in death benefits, then the charity can get the same benefit with less cost to the donor.
The donor can name the charity as the policy’s beneficiary, or the donor can transfer ownership of the policy to the charity while the donor is alive. Naming a charity as your beneficiary allows the donor to borrow against the policy, and do other things he could do with a policy while he is alive. Because the person is still the owner, he cannot take a charitable income tax deduction.
If the donor assigns ownership of the policy while the donor is alive, the donor can claim a tax deduction for part of the value of the donated policy. The donor also will be able to deduct the cash he/she gives to the charity each year to pay any premiums that are still owed on the policy. Most charities are not comfortable accepting life insurance, because they have to manage it until the donor’s death.