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Life Health > Life Insurance

Survivorship life insurance: Providing survival for charities

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The current economic crisis has brought about what may be the most severe reduction in charitable giving since the Great Depression, creating the dual challenge of rising demand for services and declining revenues. Even for those non-profits whose donors have continued their giving, the gifts are smaller. Moreover, those givers who had once hoped to make a truly significant gift that would make a significant impact on behalf of a favorite cause have deferred if not abandoned their objective.

Survivorship life insurance

Survivorship life insurance, especially when used with a life insurance trust, is one of the most beneficial vehicles in estate planning. Owing to its low cost, more robust utilization of this funding method can rescue charities, especially when combined with donation splitting, which provides a powerful leverage aspect to donors’ legacy gifts.

Donation splitting calls for two donors who share a mutual charitable interest to split the premium while their chosen charitable organization becomes the owner and beneficiary of the survivorship policy. The insurance contract is a guaranteed no-lapse policy, for which premiums are commonly paid for one year (single premium) but for no more than five years. This method of combining a low-cost policy with shared and tax-deductible premiums to create endowment funds can lead to a new and significant donor base. It combines relatively modest funding with notable endowment results. A plan’s joint givers (insureds) can be two unrelated individuals with a common charitable cause. Participation in these endowment opportunities can be utilized by the charitable organization to encourage special bonds between benefactors.

When balancing the pursuit of long-term funding with short-term budgets, charitable entities have a tendency to overlook or underestimate gifts of insurance in their fundraising efforts. But it is wise to consider the following:

  • Survivorship plans allow for one of the applicants to be uninsurable; thereby enlisting an otherwise excluded giver. Moreover, this makes it easier to split the gift without concern for each donor’s insurability.
  • Contributions show up as cash values quite early on (instantly in the case of single premium funding). Those values are available as policy loans at surprisingly low interest rates and can be used to fund immediate or urgent projects while still maintaining the long-term endowment. It may be most valuable to think of this highly efficient leveraged-giving method as providing charities both “a bird in the hand and two in the bush.”
  • This strategy enables deferring philanthropists to revisit their charitable objectives and make them happen.

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William J. Peverill is a principal in Peverill Wealth Concepts in Des Moines, Iowa. He is a life member of the Million Dollar Round Table and a specialist in the use of charitable life insurance gifting.


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