Life Settlements and Charities
Life settlements are an increasingly popular method of charitable giving. Having an insured donate the proceeds of a life settlement rather name a charitable organization as the beneficiary of a policy can have an immediate, positive impact on a charity. In addition, charities holding life insurance policies can benefit from life settlements by gaining immediate access to the value of their asset and getting much needed financial flexibility. Ultimately the better managed the charity's finances, the more empowered they will be to perform their charitable work effectively.
How can charitable organizations benefit from life settlements?
- Provides cash which can be applied immediately to charitable causes
- Allows charity to forecast income and removes uncertainty in cash flow
- Eliminates premiums, annual reviews and need for ongoing record keeping of donated policies
- Adds more options for planned giving programs and broadens scope of interest from donors
- Offers greater donor tax deductions than simply donating policies themselves
- May reduce the need to spend down assets tied to long term investments
- Immediate access to large sums of money for capital projects
- Reallocate unproductive endowments funds to better performing investment vehicles
- Develop stronger relationships with donors through more creative planned giving programs
- May bring donations from donors that might not otherwise donate due to tax benefits
When should a charity consider a life settlement?
- If the premium payments and management of premiums is burdensome.
- If the policy is in danger of lapsing or being surrendered
- If the insured (donor) would like to see impact of their donation while still alive.
- May reduce the need to spend down assets tied to long-term investments
How does a donor benefit from a life settlement to a charity?
- Provides donor with an immediate tax deduction when life settlement proceeds are donated
- Policies donated for the purpose of life settlements represent much larger tax deductions than simply donating a life insurance policy
- Allows donor to see their contribution immediately benefit a charity
- Use the tax savings to purchase different and often less expensive policies
Life Settlements as a tool of charitable organizations?
With a fluctuating economy and increasingly difficult environment for fund raising life settlements help charities maintain stable levels of giving or grant making to their respective causes. A life settlement may help when other investments are under performing or volatile. A charity can avoid drawing down on their assets with life settlements. As assets become depleted, the strength of their investment portfolio is negatively compromised. Life settlements provide the cash necessary to stabilize their financial position and maximize the services and help they provide.
Forward thinking charitable organizations and non profits can state in their gift acceptance policy that the proceeds from life settlements, in addition to or as opposed to accepting ownership of a life insurance policy is welcomed. This allows the organization immediate access to income and prevents costly annual reviews, premium payments, and record keeping.