A gift of life insurance can be an easy way for you to provide generous support to Carnegie Mellon University.
A gift of life insurance could be right for you if:
- Your life insurance policy is paid up or has substantial cash value.
- You have no loan outstanding against the policy.
- Your family is well-provided for by other means.
- You would like to make a gift to Carnegie Mellon.
How it works
Option 1: You give your policy to Carnegie Mellon.
As the policy owner, Carnegie Mellon will either cash in your policy and use the proceeds, or maintain the policy until it ends and then receive its death benefit. This gives you the satisfaction of making a generous gift to Carnegie Mellon while having the benefit of no change in your cash flow and saving taxes.
Option 2: You designate Carnegie Mellon University as a beneficiary of your policy.
When your policy ends at your death, Carnegie Mellon will receive some or all of your policy's death benefit, as you have designated. This arrangement gives you the satisfaction of making a generous gift to Carnegie Mellon while having the benefit of no change in your cash flow and saving taxes. You also retain the ability to change your mind should circumstances in your life change. This added flexibility is only found in Option 2.
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 your untimely death. 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 Carnegie Mellon University. The value of your policy can provide generous support to our mission 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 Carnegie Mellon, 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 CMU, providing tax savings if you itemize. You will also remove your insurance from your estate, potentially saving estate taxes, as well.
In order to make your gift, you must assign Carnegie Mellon all ownership rights to your policy and make Carnegie Mellon the irrevocable designated beneficiary of the policy. Usually this can be accomplished by completing a simple form from your insurance provider. Be sure to identify us as: Carnegie Mellon University
Make Carnegie Mellon a designated beneficiary of your policy
Another great way to make a gift to CMU with your life insurance policy is to make Carnegie Mellon a designated beneficiary of your policy. When your insurance reaches maturity, Carnegie Mellon 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 your gift is revocable, you do not receive an income tax deduction at the time you create the designation. Rather, your estate will receive an estate tax deduction for the amount your insurance policy distributes to Carnegie Mellon, provided your estate is subject to estate tax.
Making Carnegie Mellon a designated beneficiary of your life insurance policy is an easy process. Simply contact your insurance agent to make a change on your policy's designation form. Be sure to identify us as: Carnegie Mellon University.
Loan against policy will create taxable income
As a general matter, 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.
However, if you plan to designate Carnegie Mellon as a revocable beneficiary of your policy, the existence of an unpaid loan against your policy will not affect your tax burden in this regard.
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. You should verify that your state would make this determination before you make your gift.
Bridgett Wiggins 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 in their 40s and 50s, no longer need the financial protection the policy provides. The cash value of her policy is now over $90,000 and she has paid $75,000 in premiums.
Grant has enjoyed an association of many years with Carnegie Mellon, and would like to honor this relationship with a significant gift. However, she has been reluctant to use her liquid assets to make the gift. When Grant learns that her policy can be put to a new and productive use, she is delighted. She arranges with her insurance agent to donate her policy.
- Bridgett’s gift will entitle her to an income tax charitable deduction that could save income taxes if she itemizes. The terms of the insurance policy and applicable tax law will determine the size of her deduction. In this example, the likely deduction is $90,000 but Bridgett would need a qualified independent appraisal to document her deduction.
- Her $250,000 death benefit will not be included in her estate.
- She has the satisfaction of making a generous gift to Carnegie Mellon University without reducing her income level.
- As the policy owner, Carnegie Mellon can either cash in the policy and use the $90,000 for its purposes immediately, or hold the policy and receive $250,000 as a legacy gift from Grant at her death.