Life Insurance Gifts of insurance policies can enable a donor to provide ultimately a much larger gift than one of cash. While most life insurance gifts are desirable and easily administered, the Foundation must carefully review those policies that require co-payments from the Foundation, have substantial indebtedness or have assignments of interest or beneficiaries other than the Foundation. Policies close to self-funding require little administration, contain a cash value and provide a guarantee of ultimate value of the gift. Donor premium payment plans should be monitored as to the options available if the donor is unable or unwilling to continue premium payments.
Term insurance provides few options if the donor is unable to continue paying the premiums.
Life insurance also may be used to benefit heirs when assets are contributed to the Foundation through an irrevocable life insurance trust. Under this scenario the donor gives cash to the Foundation, which in turn makes the premium payments to the insurance company. The donor pledges to make regular gifts to cover the premium payments. Retention of a policy by the donor designating the Foundation as a beneficiary or contingent beneficiary of the policy. In this case, the donor retains ownership of the policy, so there is no immediate tax deduction available for the donor.