The Unlimited Estate Tax Charitable Deduction, Section 2055

An unlimited charitable deduction is allowed for the net amount of life insurance proceeds included in the insured’s estate if they are then paid to a qualified charity. If the proceeds are reduced by a policy loan, only the net amount includable in the estate and payable to the charity will qualify for the charitable deduction.

If the policyowner is not the insured but dies first, a charitable deduction will be allowed if the unmatured policy passes to a qualified charity. The inclusion and value of the deduction will be measured by the same rules governing a lifetime gift to a charity. In most cases, the deduction will be measured by the sum of the interpolated terminal reserve plus the unearned premium (as of the date of the policyowner’s death).

Reproduced with permission.  Copyright The National Underwriter Co. Division of ALM

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