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Vested ideas (vendor column) – Life settlements an option

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[Publisher’s note: The Philanthropy Journal does not necessarily endorse the opinions, products or services offered or cited in this paid advertorial.]

By Jolene D. Fullerton

Amid fundraisers’ growing concerns about the current charitable giving climate, dampened by the erratic stock market and shaky economy, life settlements have emerged as a new fundraising opportunity.

A life settlement is the sale of an existing life insurance policy for a lump sum of cash that is more than the cash surrender value.

A life insurance policy is property, like a car, house, stocks or bonds, that can be legally sold in accordance with applicable laws.

Through a life settlement, a policy owner can realize value today from an asset that is generally thought to only have a benefit when the insured passes away.

Many variations and complex estate and tax planning strategies can be employed when utilizing life settlements in a planned giving program.

Using the simplest strategy, a donor who owns a life insurance policy gives it to the philanthropic organization, which immediately sells the policy for a lump sum of cash through a life settlement.

Donors benefit by:

* Making donations to their favorite philanthropies without depleting cash reserves or losing income-producing assets.

* Getting a tax deduction for the fair market value, or selling price, of the life insurance policy instead of only the cash-surrender value.

* Being able to see their donation put to use during their lifetime rather than after their death if the organization did not utilize a life settlement.

* Eliminating the requirement of continued premium payments on the policy.

* Removing a taxable asset from their estate if the policy was individually held.

Philanthropic organizations benefit by:

* Receiving donations from donors who may not have otherwise been in a position to contribute at all.

* Collecting a lump sum of cash today instead of having to wait for the insured’s death to collect the proceeds.

* Not having the financial burden of paying premium payments to keep the policy in force.

* Providing a valuable option to donors that furthers their tax and estate planning objectives and invites the opportunity for future or additional gifts.

* Improving their annual budget-forecasting ability

Life settlements can generate money by encouraging current gifting of life policies, while turning already donated policies into cash.


Jolene D. Fullerton, former director and vice president of the Viatical and Life Settlement Association of America, the industry’s trade association, is general counsel for, First Secured Life a life settlement broker company in Fort Myers, Florida.

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