Which statement accurately describes charitable use of life insurance?

Which statement accurately describes charitable use of life insurance?

• A. Use life insurance to fund retirement savings.
• B. Use life insurance to cover medical expenses only.
• C. Use life insurance as the sole income for the insured.
• D. Use life insurance to fund charitable organizations upon the insured's death.

Answer: (D)

Charitable use of life insurance means arranging so that the policy’s value helps a charity after the insured dies. This can happen by naming a charity as the policy’s beneficiary, or by transferring ownership of the policy to the charity or to a charitable trust that benefits the charity. The death benefit then becomes a gift to the organization, providing a substantial, predictable source of support for its programs, endowments, or capital needs. This description best captures the idea, because the essence of charitable use is supporting a charitable cause with the policy's proceeds after death. Using the policy to fund retirement savings, covering personal medical expenses, or providing the insured with sole income are not inherently charitable purposes, even though a life insurance policy can serve those roles in other contexts.

Charitable use of life insurance means arranging so that the policy’s value helps a charity after the insured dies. This can happen by naming a charity as the policy’s beneficiary, or by transferring ownership of the policy to the charity or to a charitable trust that benefits the charity. The death benefit then becomes a gift to the organization, providing a substantial, predictable source of support for its programs, endowments, or capital needs.

This description best captures the idea, because the essence of charitable use is supporting a charitable cause with the policy's proceeds after death. Using the policy to fund retirement savings, covering personal medical expenses, or providing the insured with sole income are not inherently charitable purposes, even though a life insurance policy can serve those roles in other contexts.