Life Insurance

Students studying on the lawn

Life Insurance

Overview

Maximize Your Impact

Giving a life insurance policy you no longer need or funding a new policy to support the University of Virginia are both excellent ways to make a gift. When an existing policy is no longer needed in whole or in part to satisfy its original purpose (the children are grown, the spouse is provided for), the policy can be an ideal asset to fund a charitable gift larger than anything you might be able to fund during your lifetime.

Making a gift of life insurance to the University:

  • Eliminates the asset from your taxable estate at your death.
  • Ensures that your other assets will still be available to loved ones.
  • Entitles you to a charitable income tax deduction.

    Life Insurance

    How do I give Life Insurance?

    Designate the University of Virginia as a beneficiary

    As you may know, life insurance proceeds are a taxable portion of your estate when you die unless you designate your spouse or a charity as your beneficiary.

    By designating the University as the beneficiary of your life insurance policy, this asset will be eliminated from your taxable estate at your death, and you will be assured that 100% of your designated amounts will be applied fully to the University school, unit, or program you designate for the purposes you define.

    Your designation will ensure a legacy of support for the University often far greater than you might imagine, while other assets in your estate will still be available for your family and other beneficiaries.

    Designating the University as a beneficiary of your policy is simple— just request a beneficiary designation form from your life insurance company and complete it accordingly. Note that, because your designation is revocable, you will retain maximum flexibility during your life to adjust your beneficiary designation if your personal or family needs change.

    Name the University as an Owner and Beneficiary of Your Policy

    If you no longer need a policy for which you have paid all premiums owed (a “paid-up” policy) or a policy for which you have made all current premium payments but for which additional premiums are owed (a “partially paid-up” policy), you might consider transferring ownership of the policy to the University and designating your preferred school or program as beneficiary of the policy proceeds.

    You will be entitled to a current charitable income tax deduction based on the value of the policy at the time of your contribution. If premium payments are still owed on the policy, you will be eligible for an income tax deduction for the value of the policy at the time of your contribution plus additional income tax deductions for future cash contributions you make to the University to cover premium payments as they come due.

    Using Life Insurance to Create a Scholarship

    Mr. Smith wants to fund a scholarship benefiting students at the University, but he knows that his modest retirement income won’t provide enough resources to fund the scholarship during his lifetime.

    Fortunately, Mr. Smith has a partially paid-up $125,000 life insurance policy with an annual premium of $2,500 and a current cash surrender value of $75,000. Originally purchased to take care of his minor children, the policy is no longer a necessary part of Mr. Smith’s estate plan now that his children are grown.

    If Mr. Smith transfers ownership of the policy to the University, he will receive a current charitable income tax deduction for the fair market value of the policy, which the Office of Gift Planning can help him obtain.

    In each subsequent year, Mr. Smith will contribute $2,500 cash to the University, which will in turn pay the policy premium. Mr. Smith will be eligible to claim a charitable income tax deduction for each cash contribution made.

    At the end of Mr. Smith’s life, the $125,000 in insurance proceeds will be used to establish Mr. Smith’s scholarship.

    By giving the University his insurance policy, Mr. Smith will be able to fund a charitable gift much larger than he had thought possible during his lifetime, and he will have created a thoughtful and important legacy for the University’s students.

    The University of Virginia does not provide legal, tax, or financial advice. We strongly recommend that you consult professional advisors on all legal, tax, or financial matters, including gift planning considerations. To ensure compliance with certain IRS requirements, we disclose to you that this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of avoiding tax-related penalties.