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Gift of Life Insurance

  • 1.  Gift of Life Insurance

    Posted 21 days ago

    Hello AASP, 

    Does anyone have a gift agreement they'd be willing to share with details related to a gift of life insurance? The donor is planning to apply for the policy and name the university as owner and beneficiary. Further, he is going to donate stock to cover the cost of the premium (up front). 

    I'm thinking this will need to be two-fold: 

    1. the gift of stock to cover life insurance premium 
    2. realized life insurance pay-out in the future; will support undergraduate studies/labs/supplies at Armour College of Engineering 

    Anything at all would be so appreciated! 



    ------------------------------
    Cameron Alzubi
    Director, Gift Administration
    Illinois Institute of Technology
    calzubi@iit.edu
    giftadmin@iit.edu
    ------------------------------


  • 2.  RE: Gift of Life Insurance

    Posted 21 days ago
    Have you discussed the option of the donor using the same funds and establishing an endowment?  Depending on the donors' age you may find that the ROI for your institutions is far better going that route.

    If not, then the gift agreement would look like any other as the donor is making a cash gift to you (the premium payments).  You are the owner and beneficiary of the policy and if the haven't been any previous premiums, the only gifts are the cash.

    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: Gift of Life Insurance

    Posted 21 days ago

    John, 

    Thank you for such a quick response! It's my understanding that the donor is taking this route because of a specific tax benefit. Which then leads me down another rabbit hole. Apparently there are additional IRS rules for a single premium life insurance policy? News to me! https://www.policygenius.com/life-insurance/what-is-single-premium-life-insurance/ 

    Does it seem reasonable to have the agreement address these questions? 

    1. Is the donor or IIT the policy owner? 
    2. IIT pays premium from revenue of sold stock gift: is this a single premium life insurance policy, or will IIT pay the premium on a specified schedule? 
    3. Which company holds the policy? and what is the policy number? 
    4. What is the policy type? (Term, whole life, universal) 
    5. Policy face amount; Premium amount 

    What else am I missing?

    ------------------------------
    Cameron Alzubi
    Director, Gift Administration
    Illinois Institute of Technology
    calzubi@iit.edu
    giftadmin@iit.edu
    ------------------------------



  • 4.  RE: Gift of Life Insurance

    Posted 21 days ago
    So, from the sounds of it, the donor is first going to pay the policy in its entirety and THEN give it to you.  Meaning that the stock must be paid to the insurance company - and they will NOT avoid capital gains taxes.  In that case, the donor will need an appraisal for the donated policy - and the gift amount is basically going to be the stock value.

    If the donor is expecting you to take out the policy first (as owner and beneficiary), then they can make the stock donation to you and avoid capital gains.  But the same would be true if they gave you stock to fund an endowment.

    I think the donor is trying to find a tax loophole - which is fine.  But they do not need to take out a life insurance policy to do so.  They can simply give you the stock today and you can either put it in an endowment and spend the interest or put it in a restricted fund and spend it as you need it.

    If it goes to a life insurance policy you cannot do anything until the donor dies or you cash in the policy.

    I think the donor needs to have their tax-advisor talk to your CFO.  Unless the donor is in their 80s I am not certain a life insurance policy is the way to go.

    Feel free to call me if you would like to take this off-line.

    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