Even as term life insurance has become more common, many people still hold whole life, universal life, or variable life insurance policies. Over time, the original reason for having a policy may change. In many cases, when the original need for a policy goes away — children become independent or other assets have increased to fill risk gaps — a policyholder may be left wondering what to do with the policy.
Before cashing in a policy, we encourage you to consider how life insurance can play a meaningful role in charitable giving. Here are a few examples.
1. Name a Charitable Fund as Your Beneficiary
One simple option is to name a charitable fund at the Sacramento Region Community Foundation as the beneficiary of your policy, either in full or in part. This allows you to make a significant future gift at a relatively modest cost today through ongoing premium payments, and can align well with estate planning goals. The benefit passes directly to the charitable fund, outside of probate, and may help reduce the taxable value of an estate.
2. Donate an Existing Policy
Another option is to donate an existing policy to the Foundation or another charitable organization. In this case, ownership of the policy is transferred to the organization, which then becomes both owner and beneficiary. Depending on the policy, you may be eligible for a charitable income tax deduction. If premium payments are still required, you can continue making them through charitable contributions — turning future premium payments into gifts that support the causes you care about.
3. Use Life Insurance as Part of a Long-Term Giving Plan
Some donors also use life insurance as part of a broader, long-term giving strategy. This might include purchasing a new policy specifically for charitable purposes or combining insurance with tools like charitable trusts. In some cases, insurance helps replace wealth passed to charitable causes so heirs are not financially disadvantaged, allowing donors to balance philanthropic intent with family goals. Through these approaches, insurance policies offer flexibility, leverage, and tax efficiency, making them a valuable tool in a well-rounded charitable giving plan.
If you’re curious about whether life insurance could play a role in your charitable plans, we encourage you to talk with your financial advisor and then reach out to us. We’re happy to help you explore how life insurance gifts might fit alongside your other giving goals and to serve as a thought partner as you plan for the future. We’re here for you.
Your Philanthropy Team
We’re here to help you give with confidence.
