3 NonProfits Succeeding with Life Insurance

October 04, 2021

Hospital

Nonprofit organizations have big shoes to fill when it comes to providing valuable community services. To continue to support their own infrastructure as well as meet their philanthropic objectives, many are finding that their goals are easier to reach when life insurance is part of the equation. 

Life insurance is beneficial to both the policy donor and the nonprofit alike. Here are 3 times a nonprofit partnered with Legacy Giving to find success in using life insurance to support their mission.

1. First Offering Response

Charitable community organization who partnered with Legacy Giving recently sent out an email their donors highlighting the value of utilizing unwanted/unneeded life insurance for gifting. They note that they received several viable opportunities that same day. Here is one of these cases:
 
81 year old female with a $2M permanent policy with no remaining cash value. She had not been paying premium for many years and now needs to restart paying $80K annual premiums in order to carry the coverage on to maturity. She no longer needs this coverage and is not interested in paying this large expense.
 
Upon market evaluation we were able to sell this coverage for $500K.


2. Tax Efficient Talent Retention

A large hospital system is led by a nationally recognized, entrepreneurial leader. The hospital system is constantly competing with the for-profit sector for this leader’s talents. In recognition of his service and in an effort to retain this key leader, they planed to pay him a $5M cash bonus.... Until TDC got involved and showed them a better way.

We recommended Split-Dollar Life Insurance as the alternative to paying cash compensation. Cash is tax inefficient, must be reported on the 990, and would likely make the executives compensation not meet the reasonableness test. A Split-Dollar Agreement saved the hospital system $1M in total cost and delivered the full $5M value to the leader.
 
 
 

3. Achieving Goals with Unwanted IRA

An educational institution reached out to Legacy Giving for advice for a husband and wife donor that had a $5M IRA but noted that they did not need the income from this policy. The original plan was that they would take the Required Minimal Distributions (RMD), invest those funds and ultimately leave that to their children. They are now interested in leaving a portion of the IRA to their alma mater.  
 
We created a strategy that would efficiently achieve all of their goals:
  1. They will use qualified charitable distributions (QCD) to reduce their RMD
  2. The remaining RMDs will be used to fund life insurance coverage to benefit the children. 
  3. The remaining IRA balance will be donated to the university at death.
This strategy resulted in $0 going to estate taxes, $5.7M going to the educational institution and $8.48M going to the children. 

 

 

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