The following methods are the most common for using life insurance to establish or supplement a fund at The Seattle Foundation.
Donate an existing policy to The Seattle Foundation
If you have an older insurance policy which you no longer need, you can donate it to The Seattle Foundation and receive a current income tax deduction as long as all of the rights of ownership are transferred to the Foundation. Examples of policies that may no longer be needed:
- Business insurance after the business has been sold
- Income replacement insurance after you have retired
- Estate insurance when your estate is no longer subject to estate tax
- Mortgage insurance after the mortgage has been repaid
Purchase a new policy and donate it to The Seattle Foundation
You can purchase a new policy on your life and name The Seattle Foundation as the owner. The premiums are paid annually by your contributions to the Foundation, which are deductible. In the event you cease paying the annual premium, the Foundation reserves the right to cash in the policy.
Name The Seattle Foundation as sole or partial beneficiary
If you purchased a policy several years ago but your chosen beneficiary no longer needs the protection, you can designate The Seattle Foundation to receive some or all of the benefit. Under this option, the amount paid to the Foundation would pass free of estate tax.
Name The Seattle Foundation as your contingent successor beneficiary
You may currently own a policy naming your spouse or another individual as the beneficiary. You could name The Seattle Foundation as the successor beneficiary in the event this person predeceases you. While this option offers no immediate tax benefits, it does have the advantage of removing the life insurance proceeds from your taxable estate if they end up being distributed to The Seattle Foundation.
Purchase life insurance to replace assets given to charity
A Wealth Replacement Life Insurance Trust is a special type of irrevocable life insurance trust that creates tax-free life insurance dollars for your beneficiaries upon your death to replace assets that you gave to charity during life. With proper structure and procedures, transfers to the trust to pay premiums are not subject to gift tax, and distributions of death benefits through the trust to your heirs will not be includable in your taxable estate.