Further, they have legally attached security to the loan in order to become secured creditors. The loan with such security is called a debenture. Funding gifts via the corporation but obtaining personal deductibility can be strategic. Thus the gift of a loan by a shareholder can achieve a deduction for the individual, and funding for the gift occurs when the loan is repaid by the company. It is not technically necessary for the loan to be repaid.
Charities can hold debt instruments as part of their investment portfolios.
The shareholder gifts the debenture to a charity. The debenture is repayable 60 days after demand, but no later than 90 days after death of the shareholder. The company takes out a life insurance policy on the life of the shareholder. The face value of the policy equals the debt. If the loan remains unpaid at the time of the shareholder's death, the proceeds from the life insurance policy is used to repay the loan.