Philanthropy Puzzler: Gifts From Life Insurance Policies | Sharpe Group
 
Posted January 29th, 2021

Philanthropy Puzzler: Gifts From Life Insurance Policies


The “Philanthropy Puzzler” features gift questions fundraisers may encounter in the field, followed by solutions from our panel of experts. If you would like to send us your own “puzzler,” please email us at info@SHARPEnet.com with “Philanthropy Puzzler” in the subject line.

Philanthropy Puzzler

When Harriet received her W-2, she was surprised to find a portion of her life insurance premiums included as income. Her accountant explained that an employee with more than $50,000 of group term life insurance coverage is taxed on the premiums for the excess amount [Reg. §1.79-3(d)(2)]. Harriet asked her accountant if there was any way to avoid the tax in the future.

Puzzler Solution

Harriet can reduce the amount on which she has to pay income tax by designating charity as the recipient of a portion of the life insurance proceeds. Reg. §1.79-2(c)(3) provides that premiums attributable to amounts payable solely to charity for the entire year are not included in income for that year.

The “Philanthropy Puzzler” is featured in each issue of The Advisor, a digital newsletter charitable organizations can personalize and send to financial and estate planning advisors. For more information about this service, click here. ■

The publisher of Sharpe Insights is not engaged in rendering legal or tax advisory service. For advice and assistance in specific cases, the services of your own counsel should be obtained. Articles in Sharpe Insights may generally be reprinted for distribution to board members and staff of nonprofit institutions and other non-donor groups. Proper credit must be given. Call for details.

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