Many have found charitable life insurance to be a practical and affordable way to make a meaningful charitable gift, and there’s great flexibility depending on the donor’s financial situation.
By making the Lutheran Community Foundation the owner and beneficiary of the life insurance contract, the donor can take a charitable tax deduction for ongoing premiums paid on the contract. Upon the insured’s death, the death benefit goes to the donor’s choice of funds at the LCF, benefiting charities selected by the donor or areas of charitable work.
Tax and Financial Benefits of Giving Life Insurance
- Donors receive a charitable tax deduction for each premium paid.
- Once the policy has been assigned to the LCF, donors can pay premiums using cash or publicly traded securities. If the donor wishes to pay premiums using publicly traded securities, capital gain taxes on the appreciated value of securities owned for more than one year can be bypassed.
- Since life insurance is typically a non-probate asset, the life insurance proceeds will be paid directly to the LCF, potentially avoiding any delay in payment.
- Thrivent Financial will send premium notices directly to your client. Your client should make premium payments directly to Thrivent, unless you expect the amount of the premium to exceed 30% of your client’s adjusted gross income in that calendar year. If so, it may provide a greater tax benefit to make the payment directly to the LCF, because charitable deductions for premium payments paid directly to the insurance company are limited to 30% of the donor's adjusted gross income, excess deductions may not be carried over to future tax years. Payments made directly to LCF are limited to 50% of donor's adjusted gross income and can be carried over for up to 5 additional tax years. Please call LCF staff to discuss this situation.
The IRS now requires an independent qualified appraisal for all non-cash charitable gifts of $5,000 or more. These "non-cash gifts" include life insurance made through absolute assignment to a charity, such as the Lutheran Community Foundation. Please note that this ruling only applies to the absolute assigned value of an insurance policy, not the death benefit nor the continuing insurance premium payments made once the Foundation is named owner.
The Foundation has retained the services of an independent qualified appraiser to assess insurance gifts of $5,000 or more. There will be no out-of-pocket cost to the donor for this service. The only effect to donors is the reduction of the charitable contribution (and the corresponding charitable deduction), by the amount of the appraisal fee, which is estimated to be $200.
Target Audience
- While the age range for people giving life insurance through the LCF ranges from 4 to 95, the most ideal market is pre-retired persons (ages 50-64) and retired persons (ages 65-75).
- Clients who wish to make a significant gift with a smaller investment.
- Clients who want an annual charitable tax deduction for the premiums they pay.
- Charitably-minded clients age 65+ who are receiving required minimum distributions (RMDs) from retirement plans, but don't need the income.
Benefits to You, the Financial Representative
Helping your clients give through the LCF not only simplifies your work, you’re also compensated for your efforts. Thrivent Financial Representatives are compensated for the sale of life insurance products through its compensation system.
You don’t need any special qualifications to facilitate gifts to the LCF, and we support you with the tools and information necessary to complete your client’s gift.
More about Gifts of Life Insurance
There are a number of benefits to giving life insurance through the LCF:
- Donors can name multiple, diverse benefiting charities – Lutheran and/or non-Lutheran – through one life insurance contract owned by the LCF.
- Donors can change charities that will benefit without needing to change ownership of the life insurance contract – they simply contact the LCF.
- Donors can give anonymously if that’s their wish.
- Gifts provide ongoing support to the charities far into the future. Based on the size of the gift, a portion of the death benefit may be distributed in a lump sum to one or more charities if that’s the donor’s wish.
- Your clients can also create charitable funds at the LCF by giving an existing contract or by designating the LCF as beneficiary to receive all or a portion of a contract’s proceeds. Contact the LCF for more on the benefits of giving insurance in these two ways.
How to Establish a Life Insurance Gift at the LCF
- Complete the LCF Fund Workbook and send it to the LCF. Please include a copy of the in-force illustration if possible.
- The LCF drafts a Fund Agreement based on the charitable requests made by the donor, and sends it to the donor for signing. The financial representative also receives a copy.
- Complete the life insurance application with the insured as owner and the LCF as beneficiary.
- To ensure the donor receives the maximum tax deduction possible for their gift, have your client complete and sign Absolute Assignment Form 10A on the same date as the insurance application.
- The LCF’s tax ID number is 41-1802412
- The LCF’s address is 625 Fourth Avenue South, Suite 1500, Minneapolis, MN 55415.
- The form must be signed by the contract owner in the presence of an impartial witness or notary public.
- Send the insurance application, absolute assignment form and the first premium payment directly to Thrivent Financial for Lutherans.
- The insured retains the contract and receives premium notices.
- Premium payments on charitable life insurance contracts qualify as charitable contributions and are substantiated for tax purposes by the LCF. Premium payments should be made payable to Thrivent Financial for Lutherans. Please contact the LCF if the donor wishes to pay premiums using publicly traded securities or mutual funds.
- For more information, see: Guide to Making Gifts of Thrivent Life Insurance and choose a product using Charitable Life Insurance Options from Thrivent Financial.
