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 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. ■

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