Benefit Your Favorite Charity with a Donation from a Surprising Source

By Jon Kidd and Keith Owen

Are we truly facing the Great Recession?  Whatever the answer, countless charities that rely on donor support to fulfill their missions within the community are suffering from the slowdown in charitable giving.  This is a natural by-product of the current economic times.  According to Philanthropy.com, 52% of charitable organizations saw a drop in donations in the second quarter of 2009.  In addition to the present economic woes, it is also a fact that a history of philanthropic giving can take its toll over time, causing “donor fatigue” in donors of frequent and major gifts.  As a result, more creative strategies are becoming attractive to donors; for instance, many charitably-inclined individuals are donating life insurance policies to non-profit organizations. Alternatively, an individual may consent to charity-originated life insurance.

Philanthropist Dr. Sanford Ziff, Founder of Sunglass Hut International Inc, has long been an advocate of this form of charitable giving. A prominent donor in Miami, having gifted to such institutions as the Sanford & Delores Ziff Opera House, Dr. Ziff has strong beliefs about supporting the charitable community. According to Dr. Ziff, given these difficult times, “There is no better time than the present to consider life insurance as a philanthropic donation.”

Dr. Ziff further states, “So many charities should have considered life insurance benefit donations years ago; now look at the current situation, where charities have an even tougher time than many businesses. Charitable organizations can – and should – consider safe and valuable fundraising alternatives.”

Donating a life insurance benefit to a favorite charity is a heartwarming – and very easy – way to give to your favorite cause.  In fact, many donors are considering a newer means of leveraging their philanthropic donations through a strategy called “life insurance premium financing”, which allows them to make substantial donations, making use of life insurance as a monetized gift to a charity.  Philanthropists can also avoid paying exorbitant life insurance premiums and utilize excess liquidity for donations today.

Insurable interest (realizing a financial loss when the insured passes) typically must exist for a charity to enjoy the benefit from life insurance.  Insurable interest between a charity and a donor can exist in the following examples:

1. Donors of major gifts,
2. Significant “founders” or frequent contributors over a period of time,
3. Key leadership within a foundation or nonprofit,
4. Board members that bring valuable consideration to an organization, and
5. Key fundraisers that bring in major gifts and significant donations in aggregate.

Below, is an example of how Mrs. Smith utilizes her life insurance policy to benefit her charity, business and family:
Mrs. Smith is a 79-year-old philanthropist, business owner, and matriarch with an insurable capacity of $20 million, which is comprised of her philanthropic involvement, business interests and household net worth.  To utilize her excess insurable capacity, she seeks a loan to pay the premiums on a new Universal Life insurance policy with a face value of up to $20 million, naming her favorite charity, her business and her family as beneficiaries.  This loan for the life insurance premiums may be repaid through the policy itself, giving her the option not to make payments.  If Mrs. Smith donates a portion of her insurability to the charity in this way, she may receive recognition for a Planned Gift at the origination of the transaction, even though the donation may not be realized until she passes away.  In certain circumstances, a living benefit or “life settlement” may result in the charity receiving a donation by selling a policy for a lump sum to a financial institution during the insured’s lifetime.  It is important to note that many insurance carriers do not condone putting a policy in force or originating a policy if the sole intent is to sell the policy on the secondary market; however, a policy owner’s circumstances may change and it is within their legal rights to sell a policy.

Simply put, the charity could be the recipient of the life insurance benefit.  Therefore, in the case of financing for life insurance premiums, the charity would receive a portion of the life insurance proceeds after the bank’s loan is repaid.  The life insurance benefit ultimately replaces the future financial loss to the charity, which represents insurable interest between the charity and insured person. It is important that qualifying individuals and organizations carefully review risks versus rewards, as well as work with a specialized premium financing firm that has a respectable track record, solid references and a high level of experience and compliance within the industry.

If you have further questions about the feasibility of life insurance benefit donations, Jon Kidd or Keith Owen, principals of Banyan Life Financial, may be reached via phone at 305-695-8052 or toll-free at 800-828-ESTATE (800-828-3782).  Their office is located right on the edge of Biscayne Bay at 1800 Sunset Harbour Drive, Marina Suite 3, Miami Beach, FL 33139.  Emails can be sent to Jon.Kidd@BanyanLife.com and Keith.Owen@BanyanLife.com.  You are also welcome to view their website.

This entry was posted on Monday, September 28th, 2009 at 3:34 pm and is filed under Life Insurance Premium Financing. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.