Many life insurance policy owners feel it’s important to provide a legacy gift and financial support to organizations they believe in. Legacy giving to a worthy cause can help build better futures for others. And choosing charities as beneficiaries can be a wonderful way for individuals to act with love and generosity toward others as they face mortality.
As a policy owner, you have the right to choose your beneficiaries—and that can include charities as beneficiaries. A beneficiary is selected when you first purchase your life insurance policy, and you can change your beneficiary at any time. Your life insurance agent or financial professional can facilitate these changes.
If you’re planning to give a legacy gift and make a nonprofit the beneficiary of your life insurance policy, there are some important considerations to be aware of. The following points will help you take the proper steps for legacy giving to support to a school, organization or cause that’s meaningful to you.
Know the business of your nonprofit beneficiary.
When choosing a nonprofit for your support, the more you know about its business, the better. You want to ensure that the money will be used in a way that you wholly support.
A nonprofit can be one of multiple beneficiaries.
Estates with charities as beneficiaries can be set up to include multiple beneficiaries. You can allocate a percentage of your life insurance benefit to a nonprofit, while the remaining amount could go to a loved one. It’s not a one-or-the-other decision. You can also choose primary and secondary beneficiaries. If your spouse is your primary beneficiary, for example, a nonprofit could be the secondary beneficiary and receive your policy’s life insurance benefit should your spouse pass away before you do.
There no tax advantages to having a nonprofit as your life insurance beneficiary, unless your estate is large enough to owe taxes. (Estate taxes begin when an estate is worth more than $11.58 million.) If your estate does owe taxes, it will be able to deduct either the cash value of the insurance policy or the total amount of premiums that you paid into the policy, whichever is lower. You should always consult a tax advisor before taking any action.1
Your decision to name a nonprofit as the beneficiary of your life insurance policy is a private matter, but it’s important that you make someone aware that you’ve selected an organization to receive your benefit. This could be a lawyer or a family member—someone who can confirm to friends and family members that your life insurance benefit is going where you wanted it to go and is being used for the purpose you intended. Once you have made your decision, a New York Life financial professional can help you appoint a nonprofit as your primary or secondary beneficiary. This will enable you to leave behind an important legacy gift in which your generosity will continue to support others.
1 Neither New York Life Insurance Company, nor its agents, provides tax, legal, or accounting advice. Please consult your own tax, legal, or accounting professional before making any decisions.