DID YOU KNOW... Gift of an Existing Policy You may own an insurance policy that has a substantial cash surrender value, yet the original purpose for the protection no longer applies. The policy might have been purchased initially to provide financial security for a spouse now deceased, to educate children now grown or for liquidity to pay death taxes when liquid assets were in short supply. This policy can be a sort of hidden asset, available to be used for your philanthropic purposes. If you choose to name the Sigma Nu Educational Foundation as the beneficiary of a policy that is not paid up and also assign all incidents of ownership of the policy to the Foundation, several good things happen. You receive an immediate income tax charitable deduction for the "interpolated terminal reserve" value of the policy. This is an updated cash surrender value, a figure available from the insurer. If you itemize deductions on your tax return, your actual income tax savings depends on your marginal tax rate. A person who does not normally itemize may find the additional charitable deduction boosts his or her total itemized deductions above the standard deduction. For a paid-up policy, the deduction is the cost of replacing the coverage with a comparable policy. In either situation, the tax deduction cannot be greater than your net investment in the policy (total premiums paid less any dividends received). The charitable deduction is reduced by any outstanding balance of a policy loan, which may also be considered additional taxable income. When death benefits under the policy are removed from a taxable estate, there may be a future estate tax savings if your estate would have otherwise been subject to tax. If premiums on the policy are still payable, there are two options to be considered. You may stipulate that the assignment of ownership of the policy at its current value is the total charitable gift, immediately available for our use. In that case, we might surrender the policy for cash. Or we might decide to accept an amount of paid-up insurance. In either case, you are relieved of the obligation to make further premium payments. However, an alternative may be even more attractive. The policy can remain in force so that the larger, original face amount will become your gift. You pledge to make unrestricted gifts at least annually, which we will use to pay the premiums. The gifts are deductible, and the policy is thereby kept in force with pretax instead of after-tax dollars for a lower actual cost. A further potential advantage is to make annual gifts in the form of marketable capital gains property otherwise to be sold, such as appreciated stock. Avoidance of the capital gains tax is a second tax savings, not possible when paying premiums directly to the insurer. Payments of the premiums directly to the company, instead of comparable gifts to us, are considered to be gifts "for the use of" instead of "to" us. If made in cash, the gifts are deductible only up to 30 percent of adjusted gross income for the year, rather than up to a 50 percent annual limitation.