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Life Settlements are an increasingly popular method of charitable giving. Having an insured donate the proceeds of a Life Settlement rather than naming a charitable organization as the beneficiary of a policy can have an immediate, positive impact on a charity.
Life Settlements are increasingly popular forms of charitable giving as they provide much needed financial flexibility to charities. Ultimately, the better managed the charity's finances, the more empowered they will be to perform their charitable work effectively.
Life Settlements as a tool for 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 underperforming or fluctuating. 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 proceeds from Life Settlements, in addition to or as opposed to accepting ownership of a life insurance policy, are welcomed. This allows the organization immediate access to income and prevents costly annual reviews, premium payments, and recordkeeping.
How charitable organizations can 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 recordkeeping of donated policies
- 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 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 the impact of their donation while still alive
- May reduce the need to spend down assets tied to long-term investments
How the donor benefits from a Life Settlement to a charity
- Provides donor with a tax deduction in the amount of the Life Settlement when proceeds are donated
- Allows donor to see their contribution immediately benefit a charity
- Use the tax savings to purchase different, and often less expensive, policies