Who do you want to protect financially after you’re gone? Life insurance is designed to help you provide that support once you’re no longer there to do it yourself. Many people name a partner, adult child, or other close friend or relative to receive their life insurance proceeds. But did you know that your beneficiary doesn’t have to be a person?

In some cases, people name a charity or other organization as the beneficiary of their life insurance benefits. If there’s a cause that’s been meaningful to you over the years, gifting your life insurance payout to a charity is a way to help support that work after you die.

Americans are a charitable bunch: The average household gives about $2,500 per year to charitable organizations, totaling nearly $450 billion in donations in 2019. While those monthly donations to your local food bank or animal rescue organization do a lot of good, naming a charity as your beneficiary of a life insurance policy can provide financial support on a much bigger scale. To make the greatest impact with your charitable gift, here are some things to know before naming a nonprofit as a beneficiary.

Gifting life insurance to a charity

Naming a nonprofit as your life insurance beneficiary is a common and relatively simple way to give the gift of life insurance to charity.

Here’s how to do it:

Leaving life insurance to charity

• Choose a charity you’d like to receive your life insurance. About 1.8 million nonprofit organizations are currently registered in the United States. There are so many good causes that you might want to support, from food pantries to medical research to education. Do your homework ahead of time to make sure that you feel good about where your money is going. Check into their financials or use a website like Charity Navigator to make sure that they’ll be good stewards of their funds.
• Contact your charity about your planned donation. To avoid any surprises down the road, consider getting in touch with the charity first. The organization can provide you with its correct legal name and EIN number, which is like a Social Security number for an organization, to complete the paperwork. If you plan to give a lot of money or want your dollars to go to a specific area of the charity, talk it through in advance to avoid any surprises.
• Add the charity as a beneficiary on your life insurance policy. Wondering how to make a charity a life insurance beneficiary? As the life insurance policy owner, you get to control who you name as your beneficiary. You can also name multiple beneficiaries, which is often helpful in naming a charity. Part of the money can go to your family and the other part can go to a charity. You can also adjust your beneficiaries and the payout amounts for each later on if you change your mind. When you buy a policy, let your life insurance company know which beneficiaries you would like to add. You can also update an existing policy, which is as simple as filling out a form.

Keep in mind that your type of life insurance policy affects the payout. Term life insurance typically lasts for a specific period of time, so the charity will receive the payout while the policy is active.  Permanent life insurance lasts your entire lifetime as long as you keep up with premiums, so your charity receives a guaranteed payout.

Are there tax advantages to gifting life insurance to charity?

While giving your life insurance proceeds to charity comes with plenty of feel-good benefits, you won’t typically get a tax break for it. The premiums you pay on your policy while you’re living aren’t deductible from your income taxes.

If you have a permanent policy, naming a charity as a beneficiary may be a way to reduce your estate and any taxes associated with it. Because of the current federal estate tax exemption limit ($11.7 million in 2021), though, this usually only has tax benefits for the ultrawealthy. However, life insurance can offer tax advantages to your beneficiaries – the payout from a life insurance policy is typically tax-free.

Still have questions about naming a charity as a beneficiary?

We’re here to help. Fidelity Life offers a wide variety of products to support people at every stage of life. Get your quote online today or call one of our agents at (855) 291-6365.

At Fidelity Life, our goal is to make life insurance simple, affordable, and understandable for everyday families. This content is intended for educational purposes only. Each post is carefully fact-checked, reviewed, and updated regularly to ensure the information is as relevant as possible.