You can make an outright gift of a policy on the life of the donor. The value of the policy at the time of the gift is generally deductible, with certain restrictions. The charity (the donee) is the beneficiary. The donor may give the charity enough cash each year to pay the premiums on the policy; if so, these cash gifts are generally deductible.

When this method of giving is used, it is important that the donee, the charity, be given all the rights of ownership. If the donor retains any control over the policy, the tax advantages (deductions) are lost.

The other common method of making charitable gifts of life insurance, the donor can retain ownership of the policy, make the charity the beneficiary, and continue to pay the premiums. In this case, the premium payments are not tax deductible. The amount of the proceeds will be included in the donor’s estate, but will “wash out” as a charitable deduction. One advantage of this method is that the donor retains the right to change beneficiaries should this become necessary or desirable. The principal disadvantage is that premium payments are not deductible on the donor’s federal income tax returns.