We love helping people and one of the things we have come to understand is that EVERY PERSON’S NEEDS ARE DIFFERENT, EVERY CASE WE WORK ON IS DIFFERENT.
There is a one special case recently that was an extreme challenge and quite frankly, something we nave never came across in the past.
A 69 year old lady called, after a few minutes of questions and answers, we finally got cut through the minutia and she explained;
I would like my final wishes to be taken care of as per our family traditions, but I do not trust anyone in my family, the funeral home, or the cemetery as a beneficiary.
I have heard similar stories, but not this exact situation. In this particular situation, the person lives in one state but their church and cemetery is in another state. This obviously complicated the case.
99.99% of the time, some that purchases final expense life insurance (or any type of life insurance) has a beneficiary, or beneficiaries, already prepared for an application. Usually, the beneficiary is a family member (children, spouse, immediate family, etc.) and in some rare cases it’s a friend or someone that is NOT an immediate family member.
In cases where the beneficiary is NOT an immediate family member, you may be required to prove that the beneficiary, or beneficiaries, has an insurable interest in the insured.
Consistent with the topic of this article, I have never worked a case where someone did NOT know who their beneficiary would be, until recently!
It is imperative that your beneficiaries are trustworthy and will fulfill your final wishes as YOU and YOUR FAMILY require, NOT use the funds as they deem fit.
So, when identifying beneficiaries or updating your beneficiaries, here are some alternative people in your life that may be uniquely qualified and have an insurable interest in you, the insured;
Let’s quickly dispel a myth or misconception of final expense life insurance. One commonly misunderstood part of final expense or burial life insurance is that it’s LIFE INSURANCE. The beneficiary (beneficiaries) will receive a CHECK, the funds are not earmarked or used as pre-payment for any products or services. This is a VERY common misconception.
I mention this because in the recent case we are referring to, the lady did ask if her premiums would be tax deductible if the beneficiary is a charity – THAT IS NOT THE CASE, AND SIMPLY STATED NOT TRUE.
Regardless of type of life insurance (term life, whole life, final expense, etc.), it is very common to allocate, assign or designate a portion of the benefit to a charity.
Naming a charity as a beneficiary is simple: you write in the charity name on your beneficiary designation form. Life insurance policies allow you to pick multiple beneficiaries, and even specify what percentage of the money should go to each beneficiary. So you can decide that 100% of your benefit should go to a charity, or 80% to your family and 10% to charity, or any combination you’d like.
Any charity chosen must be a qualified 501(c)3 charity that meets the IRS definition of a nonprofit organization. Make sure the charity you wish to support will accept your life insurance policy. Some types of policies, such as term policies, are often shunned by these organizations.
MYTH: There is no federal tax benefit or state tax benefit for naming a charity as your life insurance beneficiary, and you can’t write off your premium payments as an income tax deduction. But with permanent policies, the proceeds will be eligible for the federal estate tax charitable deduction. The benefit (death benefit) is tax free but the premiums paid in are AFTER TAX dollars.
Question: A member of a church or spiritual center asked if she can purchase a life insurance policy on her life and name the church as a beneficiary. She plans on assigning her husband as the primary beneficiary but would also like to list the church as a secondary beneficiary if she outlives her husband. Can she assign her church as a beneficiary?
Answer: Yes, a member can name a church as a primary or alternate beneficiary under a life insurance policy. Here are some things to consider:
Times can be tough, sometimes and with 42% of americans having less than $400 in the bank, making ends meet is a challenge. Considering the squeeze and hardship put on middle-america, paying tithes to your church can be a financial challenge.
That said, we all have a spiritual connection with our place of worship, and even if you may struggle with your tithings on occasion, a charitable donation designation on your life policy to your house of worship, even in a small amount, is a great way to support your house of worship.
Beyond designating your church or house of worship as a beneficiary, the fact that your spiritual leader and house of worship may be intimate with your final wishes, they are a community that you can trust to ensure your final wishes are carried out.