Clients come to their Houston estate planning lawyers with a desire to make a difference to the next generation. Obviously, there is a need to plan for children and grandchildren, but many local residents are also looking for ways to benefit their favorite organizations. Charitable giving provides an opportunity to do something good for others and to help define your own legacy. There are various methods you can use for this purpose, and your estate planning lawyer will go over them with you. One option is to make the charitable organization the beneficiary of a life insurance policy.
Life insurance provides a way for you to leave money to your family, but if they are in a position where they are already taken care of, you might want to consider naming a charitable organization as the beneficiary instead. Perhaps you have other means in place to care for your adult children, or perhaps you do not have children at all. In these cases, you might want to use that insurance policy to support a cause that is near to your heart.
Tax Implications of Leaving Your Life Insurance Policy to Charity
There are different ways to bring this about, but your estate planning lawyer will likely advise you to go ahead and name the charity as the beneficiary on the policy. In a lot of cases, you will even get to use it as a charitable deduction right away. The premiums that you continue to pay can also be used as tax deductions each year. Your other heirs can also benefit because when you pass away, the insurance policy’s value will be taken out of your taxable estate, meaning that there are less taxes to be paid by those heirs.
The amount that you can use as the actual value for the policy can vary for tax purposes. Your attorney will work with you to find out what makes the most sense here in Texas. Factors like the cash surrender value and others will have to be used to determine the policy’s fair market value.