Introduction
As a non-profit organization or accounting professional, you are always seeking ways to maximize your impact and increase funding for your cause. One strategy that may often be overlooked is the utilization of life insurance major gifts. In this guide, we will explore the benefits of this innovative solution and how it can help your organization secure additional funding to achieve your goals.
Benefits of Life Insurance Major Gifts
First and foremost, life insurance major gifts offer a significant financial advantage for both donors and non-profits. Unlike traditional life insurance gifts, which are typically planned gifts that are not realized until the donor’s death, life insurance major gifts allow donors to make an immediate impact by transferring their policy as a major gift. The result is an upfront charitable deduction, no further premium obligation (by either donor or charity), and a substantial increase in funding for the non-profit organization.
Another key benefit of life insurance major gifts is the flexibility they offer. Donors have the option to donate all or a portion of their policy, allowing them to maintain some ownership and receive a portion of the proceeds. This provides a win-win situation, as the donor can receive a valuable source of funds while also making a meaningful contribution to a cause they support.
Finally, life insurance major gifts also provide a unique opportunity for non-profits to engage with their donors in a new and meaningful way. By offering this solution, non-profits can demonstrate their commitment to finding innovative solutions to secure funding and make a positive impact in their community. This can help build stronger relationships with donors, leading to increased engagement and support in the future.
Partial Policy Donation Strategy
The utilization of life insurance major gifts provides donors with a flexible solution to support the causes they care about. One such strategy is partial policy donations.
Keeping Part of the Proceeds
This approach is available for almost any policy, and allows the donor to keep part of the proceeds and donate the rest. As a partial interest asset, life insurance ownership can be split in the eyes of the IRS. However, it will be up to the insurance carrier rules if they allow multiple owners to be designated at specific percentages on the policy. Most carriers allow this, which provides a great way for someone to make a valuable charitable contribution and receive funds to use themselves.
Keeping Part of the Policy
This approach is not an option with all policies, however, allows donors to keep a portion of their policy while donating another portion. Effectively reducing their premium and the face amount of larger policies to levels that align with their current needs while supporting philanthropic goals. On the portion of the policy that is not kept, the same ability to split proceeds discussed in the last paragraph applies.
Applying to Term Policies
This strategy typically only applies to term policies, which can almost always be contractually split apart. A donor who has a term policy may choose to donate a portion of the policy and maintain ownership of the rest. This can be a cost-effective way for the donor to make a charitable gift.
Additionally, donors who have a term policy may choose to donate their policy when it is no longer needed for their own use or the premiums are about to increase. This can be a valuable way for donors to make a major gift while also reducing their premium obligation. The proceeds from the donated portion of the policy can then be used by the non-profit to further its mission and goals.
Life Insurance Major Gift Process
The life insurance major gift process involves several key steps to ensure successful transactions and maximize the value of the gift.
1) Fair Market Value Determination: The first step is to determine the fair market value of the life insurance policy. This provides donors with an understanding of how much their policy is worth, which is important information when making a major gift.
2) Acceptance of Policy: After the fair market value has been determined, the donor decides how much of the life insurance policy is transferred to the organization responsible for liquidating the policy. In this case, the Doro Foundation is the organization that specializes in maximizing the value of life insurance policies for non-profit organizations and managing the liquidation process.
3) Liquidation of Policy: The Doro Foundation then sells the life insurance policy for the highest possible value and provides a qualified appraisal along with Form 8282. The Foundation partners with LS Hub, the most advanced solution for obtaining the highest fair market value of life insurance policies, to bring direct multi-buyer connection through technology and ensure the benefit of every donation is maximized across a global network of all the most competitive buyers (banks, mutual funds, etc.).
4) Granting of Proceeds: Finally, the Doro Foundation provides gift acknowledgement documents and assists with Form 8283. The Foundation also manages receiving, liquidating, and granting the proceeds, providing peace of mind for non-profits who do not want to deploy resources to manage these transactions.
DIY vs. Doro
Throughout the life insurance major gift process, the non-profit organization plays a critical role in ensuring the success of the transaction and has several responsibilities, including maintaining accurate records of the donation, ensuring that the gift is used in accordance with the donor’s wishes, and ensuring that the gift is properly acknowledged and that the donor receives any applicable tax benefits. Additionally, the non-profit organization has an obligation to ensure that the gift is used for its intended purpose and properly invested and managed to provide the greatest possible benefit to the organization.
The process of obtaining life insurance major gifts can be streamlined and simplified with the help of the Doro Foundation. Our team of experienced professionals and advanced technology can assist donors through the Fair Market Value Determination process, ensuring the highest value for the policy is obtained. Additionally, our partnership with LS Hub eliminates the need for high commission fees, providing a more cost-effective solution for all parties involved.
Conclusion
In conclusion, life insurance major gifts offer a multitude of benefits for both non-profits and accounting professionals. By utilizing this solution, organizations can secure additional funding, provide a valuable service to their donors, and engage with their supporters in a meaningful way. So, why not explore the potential of life insurance major gifts and see how they can help your organization make a greater impact?