Life Insurance Example

Mike Smart is a wise steward of his resources. In addition to providing for his heirs in the event of his demise, he has chosen to provide a new life insurance policy on himself, naming New Hope Community Church as owner and beneficiary of the policy. Mike named NHCC in the application for the policy, and he provided the correct tax I.D. number and legal name for NHCC.

The policy premiums Mike will pay to keep the policy in force qualify as a charitable deduction, subject to the applicable limits specified by the IRS.

Other options Mike considered were to:

1. Change his beneficiary and ownership designation on an existing, in-force life insurance policy. In this case, the charitable deduction for which Mike is eligible is the lesser of his cost basis in the policy and the policy's terminated reserve amount.
2. Donate a paid-up insurance policy, claiming a charitable deduction for the lesser of the cost basis and the replacement cost.