Life insurance is already a heavily promoted source for planned giving by charitable fundraising organizations.This is due to the substantial value of these policies and the fact that many older contributors, who no longer have a need for a policy purchased years earlier, would be potentially interested to make a charitable contribution of their policy.
With Life Settlements, a new vehicle exists for creating value from these life insurance policies. This option entails the transfer of the ownership of a life insurance policy to a third party Life Settlement Provider in exchange for a lump sum cash settlement, in excess of the policy’s cash surrender value. This company then assumes the responsibility of paying the ongoing premiums, and eventually collects the death benefit.
A Life Settlement always pays more than the cash value of the policy (on average, more than 3.5 times the cash value). Therefore, this donation option will allow the donor to capture a greater tax deduction. Furthermore, the Life Settlement Provider becomes responsible for ongoing premium payments, eliminating this financial burden from the donor or the fundraising organization. For the organization, the donation through a Life Settlement delivers an immediate liquid benefit. Furthermore, since the gift is realized now, the donor can witness the gift’s benefits during his or her lifetime.
A Life Settlement is also a flexible solution. They can be applied both to your existing life insurance portfolio and to your efforts to solicit new donations. There are no restrictions on how the cash from a Life Settlement can be used. No policy is to small to review, and any policy type can qualify. However, settlement offers will depend on factors such as the type and size of the policy, age of the insured, health conditions, and the size of the premiums.