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CHARITABLE DONATIONS

Life insurance policies are often used to increase the value of gifts to charities. This can be accomplished either by giving the policy itself to the charitable organization or by naming the charity as the beneficiary on the existing life insurance policies. Where federal estate tax considerations are important, a new life insurance policy may be purchased by the charity itself at the request of the donor, who would give the necessary permission and information to complete the policy application and would provide the funds for premium payments.

Most states have enacted specific statutes expressly stating that charitable organizations have an insurable interest in the life of the donor. The statutes were prompted by an IRS decision claiming that a charity lacked an insurable interest in the donor. In part that decision was based on a New York statute that has since been modified to recognize such insurable interest.

Life insurance can also be used for charitable giving even if the charity is not a beneficiary of the insurance policy. The donor can use adequate amounts of life insurance to fund all of the needs of surviving family members and thereby free up personal property and other assets for lifetime gifts to the charities.

Gift tax and estate tax considerations are often strong motives for making charitable gifts. Because tax laws can�and probably will�change, tax planning should be carefully coordinated by a knowledgeable tax adviser.

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