Gifts using insurance policy

Life insurance can be a beneficial and easy way of including North Star Fund in legacy plans. Donors can make North Star Fund a beneficiary of a policy or can transfer control of the policy to North Star Fund and then receive a tax deduction for the transfer. In either case, giving life insurance allows a donor to make a significant gift with no negative impact on cash flow.

Benefits of making North Star a beneficiary of a policy:

  • You retain total control over the plan during your lifetime.
  • At the end of your lifetime, you know that North Star Fund will receive a direct benefit without any tax or probate delays.

Benefits of giving a policy to North Star Fund:

  • You receive an income tax deduction for the current value of the policy.
  • You are assured that North Star Fund will receive a major contribution in the future.

Example 1:
Molly has a $100,000 insurance policy she took out a number of years ago. She would like North Star Fund to benefit from the policy at her death. By making North Star Fund a 10% beneficiary, she knows that $10,000 will come to North Star Fund in the future, but she also knows that she retains full control over the policy in the meantime.

Example 2:
Harold owns a paid up insurance policy he bought when he was 25, with a death benefit of $50,000 and a current cash value of $45,000. He has since finished making premium payments on the policy and no longer needs it. He can give the policy to North Star Fund and receive a tax deduction for roughly the $45,000 cash value.

  1. Secure a beneficiary designation form from a representative of your insurance company.
  2. Name North Star Fund as a beneficiary of the policy (if you are changing beneficiaries only, you can name North Star Fund as the beneficiary of a percentage of the assets or as a 100% beneficiary). You always retain the right to change beneficiaries in the future.
  3. If you name North Star Fund as the owner of the life insurance policy, you can usually do so on the same form (some companies require a separate form for this).
  4. If you name North Star Fund as the owner of the policy, you receive an income tax deduction for approximately the cash value of the policy. The insurance company will help you secure the exact deduction value.
  5. North Star Fund will send you an acknowledgement and receipt for the gift.
  6. At the end of your lifetime, you know that North Star Fund will receive a direct benefit without any probate delays.