Guides
Leaving life insurance to charity
Three ways to give life insurance to a charity: name it beneficiary, donate the policy, or buy a new one. How each works and the tax rules.
You can leave life insurance to a charity by naming it as a beneficiary, by giving it the policy itself, or by buying a policy that the charity owns. Naming a charity as beneficiary is the simplest and keeps you in control while you live. Donating the policy can earn an income tax deduction. The right choice depends on whether you still need the coverage for your family and how large your estate is.
Three ways to do it
| Method | What you do | Control | Tax result (general) |
|---|---|---|---|
| Name the charity as beneficiary | Fill in a beneficiary form | You keep ownership and can change it | No income tax deduction; death benefit may qualify for an estate tax charitable deduction |
| Donate an existing policy | Transfer ownership to the charity | Charity owns it; you give up control | Possible income tax deduction; later premiums may be deductible |
| Buy a new policy for the charity | Charity applies as owner, or you give the premium | Charity owns it | Premium gifts may be deductible if the charity is the owner and beneficiary |
1. Name a charity as beneficiary
This is the usual route. You remain the owner, can keep or cancel the policy, borrow against permanent coverage and change the beneficiary whenever you like. A charity can be the sole beneficiary, one of several (for example 80% to family and 20% to a charity), or a contingent beneficiary behind a spouse.
Tax effects: you get no income tax deduction while you are alive, since you have not given anything away yet. At your death the benefit passes to the charity, which as a tax-exempt organization does not pay income tax on it. Because the policy is owned by you, the death benefit is generally included in your gross estate, but the charitable deduction under Internal Revenue Code section 2055 can offset it. That mainly matters for estates above the federal exclusion, $15,000,000 per person for 2026, according to IRS guidance on Public Law 119-21, the 2025 tax law known as the One Big Beautiful Bill Act, or in states with lower thresholds. See life insurance and the federal estate tax.
2. Donate an existing policy
If a paid-up or term policy no longer fits your needs, or your children are grown and independent, you can assign it to a charity. The charity becomes owner and beneficiary. Usually you can then deduct the value of the gift if you itemize, subject to limits. In general the deduction for a donated policy is limited to the lesser of its fair market value or your adjusted basis (what you paid in premiums, less dividends and withdrawals); for a paid-up policy the fair market value is typically based on replacement cost, and for a term policy with no cash value it is small. Policies with loans can create a tax complication on transfer. See IRS Publication 526, Charitable Contributions, and transferring ownership of a life insurance policy.
If you keep paying the premiums after the donation, those payments are generally treated as additional charitable gifts. Since the charity is the owner, it can also stop paying or surrender the policy, so many donors only give policies they are willing to see surrendered.
The three-year rule that applies to insurance transfers by the insured is less of an issue with charities, because the estate would receive a charitable deduction for the proceeds anyway. See the three-year rule for transferring a policy.
3. Buy a new policy with the charity as owner
A donor can apply for coverage with the charity as owner and beneficiary and then give the charity money to pay premiums, which may be deductible. The charity must have an insurable interest in the donor, which is generally satisfied by the charity's relationship with the donor. The IRS says you cannot deduct a gift if, in connection with it, the charity pays premiums on a life insurance policy under which you, your family or another non-charity person you choose is a beneficiary; see the same Publication 526. Not every charity will accept a policy or manage it, so ask before you buy.
Which method fits whom
- You need coverage for your family and want a gift at death: name the charity as one beneficiary and keep ownership.
- You have a paid-up policy you no longer need: donating it may produce a deduction and a larger eventual gift than the cash value.
- You want to leave a large gift on a small budget: a charity-owned term or permanent policy can produce a bigger death benefit than the premiums given, but the charity bears the lapse risk and must be willing to hold it.
- You are 70½ or older and want to give from an IRA: a qualified charitable distribution from an IRA cannot be used to buy or pay premiums on a life insurance policy.
- You are single, childless or have a large estate: a charity beneficiary on a policy can be a straightforward way to leave an estate gift.
How to name a charity correctly
- Use the charity's exact legal name and tax ID (EIN), not a nickname. "The Red Cross" can mean different entities; a local chapter and a national organization may be separate legal bodies.
- Confirm it can accept the gift. Some charities have gift acceptance policies. Large donors often speak with the development office.
- State the share clearly: by percentage ("25%"), not dollars, if the policy amount may change.
- Name a contingent beneficiary in case the charity has merged, dissolved or been renamed. Some forms let you say "or its successor."
- Check donor-advised funds. Naming your donor-advised fund sponsor as beneficiary is usually allowed but needs a specific account name; ask the sponsor for the exact wording.
- Keep beneficiaries aligned with your will and your state's rules. A beneficiary designation overrides your will; see how to choose a life insurance beneficiary.
- Tell the charity (if you wish) and store the policy where your executor can find it.
Hypothetical example
Say a 66-year-old with a paid-up $200,000 whole life policy no longer needs it for family protection. Her adjusted basis is $60,000 and the policy's fair market value is $85,000. If she donates it to a university, a deduction is generally limited to the lesser of the two numbers, here $60,000, subject to her itemizing and to percentage-of-income limits, and the university becomes the owner, entitled to the $200,000 at her death. If instead she keeps it and names the university as beneficiary, she gets no deduction now, keeps the right to borrow against it, and can change her mind. These numbers are invented to show the mechanics. Confirm with a tax professional.
Common mistakes
- Naming an organization by a casual name or an outdated one.
- Leaving a large share to charity without telling a spouse or children who expected the money.
- Donating a policy with a loan or an unpaid premium.
- Assuming a deduction you do not qualify for, such as for a beneficiary designation alone.
- Forgetting that a charity-owned policy can lapse if the charity stops paying.
Key takeaways
- Naming a charity as beneficiary is simple, reversible and keeps you in control, but gives no income tax deduction while you live.
- Donating a policy can earn a deduction, generally capped at the lesser of fair market value or basis; check IRS Publication 526.
- Death benefits owned by you count in your estate, but the charitable deduction can offset them, which matters mostly for estates above the 2026 $15 million federal exclusion.
- Use the charity's exact legal name and EIN, and add a contingent beneficiary.
- Ask a tax professional before donating a policy that has a loan or a large cash value.