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C H A P T E R S E V E N T E E N1 7Gifts of and Using Life Insurance§17.1 Introduction 527§ 17.2 Life Insurance Concepts 528(a) Basics 528(b) Types of Life Insurance 528(c) Valuation 530§ 17.3 Charitable Giving andInsurance 530§ 17.4 Insurable Interest 535§ 17.5 Unrelated Debt-FinancedIncome Considerations 538§ 17.6 Charitable Split-DollarInsurance Plans 538(a) Plans in General 539(b) Charitable DeductionDenial Rules andPenalties 540(c) IRS Notice 543Life insurance can be the subject of a charitable gift. It can be considered part ofthe panoply of planned gifts, although a split-interest trust is not usuallyinvolved. A gift of life insurance is a particularly good way for a younger donorto make a major gift to a charitable organization.§ 17.1 INTRODUCTIONA person may make a gift of life insurance to a charitable organization. Where afederal income tax charitable contribution deduction is desired, the donor mustmake the charity the owner and beneficiary of the insurance policy.An individual can contribute a fully paid-up life insurance policy or a singlepremiumpolicy to a charitable organization and deduct, for income tax purposes,its replacement value. 1 Alternatively, an individual can acquire a lifeinsurance policy, contribute it to a charitable organization, pay the premiums,and create a charitable contribution deduction for each premium payment made.For an income tax deduction for a gift of life insurance to be available, theinsurance contract must be enforceable. (A contribution by means of a contractthat is void or likely to be voidable is a gift of something without value.) For theinsurance contract to be enforceable, there must be a form of insurable interestbetween the insured and the beneficiary. 21 Reg. § 25.2512-6(a), Example (3). See also United States v. Ryerson, 312 U.S. 260 (1941).2 See § 17.4. 527