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Determining fund for old life insurance policy with no traditional formal documentation

  • 1.  Determining fund for old life insurance policy with no traditional formal documentation

    Posted 26 days ago

    I've got a head-scratcher of a situation that I'm hoping to get some help on. I have two questions, but will start with the backstory, which I think will help illustrate our confusion.

    In 1986, the Development Office at my institution created what was concurrently called the "LIFEndowment" or the "LIFE Foundation" program. The program involved donors purchasing life insurance policies at very low rates on young family members and naming the college as the policies' beneficiary. The program was marketed in a rather convoluted way that mentioned increasing the endowment, engaging with first-time donors, and ensuring a consistent level of giving. We have not been able to find any formal deeds of gift that were signed, but there is a form that was filled out with the donor's name, insured's name, and tribute and recognition information. There is also a space to answer the query "Please designate my endowed fund created by the LIFE Foundation program as….." (The alumna donor we're working with now completed this section by writing "No special name.")

    Fast forward to 2021, and the first of the insured people under this program has passed away. A staff member contacted the alumna (the deceased's mother) who purchased the policy, and she has stated that she would like the funds to go into the Annual Fund. She also responded to an email with the same request. So….my first question is given that we have her intent in writing, are we OK to put the proceeds of the policy in the Annual Fund?

    In the next few months we plan to contact the other donors or insured parties and have them sign formal deeds of gift or otherwise document what their intent is regarding the proceeds of these policies. My second question is; should we be unable to get this documentation on any of the policies, how do we determine what to do with the proceeds?



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    Robyn Smith
    Director of Advancement Services
    Randolph College
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  • 2.  RE: Determining fund for old life insurance policy with no traditional formal documentation

    Posted 26 days ago
    The 1980s were big for these programs.

    As long as you have some sort of document from the original donor indicating their intent or desire, then you should honor that - and nothing else!  You should never go against a donor's wishes.

    If that purpose no longer exists, you should get input from heirs, executors, or whoever controls the estate.

    You should probably now develop an internal policy that dictates what to do with realized bequests and insurance proceeds where no intent was indicated.  A common approach is to establish a quasi-endowment for such gifts above a certain amount - say $10,000 - and anything below that always goes to the annual fund.

    Run this new policy by Counsel and include it in your Gift Acceptance Policy and you will have covered your bases.

    John
     
    John H. Taylor
    Principal
    John H. Taylor Consulting, LLC
    2604 Sevier St.
    Durham, NC   27705
    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987






  • 3.  RE: Determining fund for old life insurance policy with no traditional formal documentation

    Posted 25 days ago
    That's, John, for your wisdom. One question to clarify- are you saying if we get current documentation from the donor that she would like the funds to go into the AF, that will supersede what we have from 1986. And I'll add, that the paperwork from 1986 is ridiculously squishy and non-specific.

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    Robyn Smith
    Director of Advancement Services
    Randolph College
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  • 4.  RE: Determining fund for old life insurance policy with no traditional formal documentation

    Posted 25 days ago
    Absolutely!  If it is the same individual!  It would be similar to a donor making a change to a provision in their will.  All of these instruments are revocable until they are realized.  Of course, in the case of these policies you are now the owner and beneficiary.  So you have the final say.  But I doubt you would want to go against a donors' wishes!

    John

    John H. Taylor
    Principal
    John H. Taylor Consulting, LLC
    2604 Sevier St.
    Durham, NC   27705
    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987







  • 5.  RE: Determining fund for old life insurance policy with no traditional formal documentation

    Posted 25 days ago
    Thanks again. And you're right - we absolutely want to fulfill the donor's intent!

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    Robyn Smith
    Director of Advancement Services
    Randolph College
    ------------------------------