However, at one's death, the funds can be highly taxed. The income is then taxable when he or she takes income. But, again, the death taxes can be substantial when the spouse dies. Because of the high tax rate on IRA's at death, many individuals consider making a charitable gift to the College as the final beneficiary of their retirement plans. If you would like your spouse to be named the first beneficiary, the College would be named the contingent beneficiary for part or all of the account.
Many people own life insurance policies that have outlived their original purpose.
Perhaps the mortgage is paid, or the children have graduated and left the nest. This makes insurance an ideal vehicle for making a meaningful gift to the College, perhaps to name an endowed scholarship. If the College is named as beneficiary of a policy, no income tax deduction is realized because the beneficiary designation can be changed by the owner at a later time. However, transferring the ownership of a cash value policy to the College will generate an income tax deduction roughly equal to the cash surrender value, as it is an irrevocable gift. Future premiums made by the donor will also be tax deductible, and the policy proceeds will not be included in the donor's estate.