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Charities as Life Insurance Beneficiaries

Such arrangements can create difficulties.

• Charitable fundraisers occasionally attempt to raise funds for charity by having individuals purchase life insurance policies on their own lives naming a charity as the beneficiary. Such arrangements can create difficulties, as the IRS observed in a recent ruling. A taxpayer proposed to purchase a life insurance policy on his own life, transfer the policy to a charity, and name the charity as beneficiary. This arrangement was intended to provide the taxpayer with a charitable contribution deduction in the amount of the premiums he would pay on the policy, and in addition provide the charity with substantial insurance proceeds at his death. The IRS ruled that the taxpayer would not be allowed to deduct any portion of the insurance premiums as a charitable contribution. It noted that New York law (the taxpayer was a resident of New York) prohibits anyone without an "insurable interest" ...

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Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.

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Posted:
  • July 1, 1991

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