Learn about a fundraising tool that can create multi-million dollar planned gifts at no out of pocket expense to the qualified donor. No check is ever written by the donor of the nonprofit organization - not even for legal fees. The planned gift is made via a life insurance policy, which is funded by a qualified bank. Imagine creating a major planned gift with no out of pocket cost.
Major Planned Gifts for the One Percent
Using the Life Income Strategy (LIS)
Scenario: A qualified donor* is willing to make a major planned gift.
The donor does not want to reduce or deplete his or her personal or
business resources or net worth.
The donor is pleased to discover that a major planned gift can be
created without any out of pocket cost to any party using the Life
Income Strategy. An indexed life insurance policy is created with the
donor as the insured and the charity as the irrevocable beneficiary.
The life insurance premiums are paid by independent lenders that
are willing to fund quality life policies up to that person's insurance
capacity** using the new life policy as the primary collateral. Additional
collateral may be required in certain cases.
Interest on the premium loans is paid by Penn Mutual and secured by
the death benefit under a special policy provision.
Advantages of using the Life Income Strategy:
a) The donor has established a major planned gift, perhaps multi-
millions.
b) There is no out of pocket cost disrupting the donor's personal
or business cash flow, net worth or future borrowing capacity.
c) There is no diminution of the donor's personal or business estate or net worth.
d) The charity is assured of a major planned gift.
Summary
A qualified person can create a major planned gift with no out of
pocket cost. This concept can also be used for other purposes such as
estate liquidity, key person or buy—se|| insurance or gifts to children or
grandchildren.
* Qualified donor
a) $5,000,000 net worth
b) Under age of 70
c) Reasonably insurable
d) Donative intent
** Insurance capacity is the person's net worth minus any existing life insurance.
Strategy #2
Questions and Answers
Why is there a $5 million net worth restriction?
This is a requirement imposed by the lenders. Lenders want to deal
with highly qualified individuals using this financing concept.
What insurance companies are used?
Penn Mutual has special policy features that make them the company
of choice. Producers typically apply to a number of carriers for medical
underwriting in order to obtain the best overall package for the client.
Who are the lenders?
The strategy uses major national firms such as Wells Fargo for policy
financing.
Who pays interest on the premium loans?
Penn Mutual has a special feature that allows them to pay the premium
interest (identical to the 40% withdrawal feature used in Strategy #1).
Other lenders will allow the loan interest to accrue over the length of
the loan to maintain the no out of pocket feature.
What is acceptable as collateral?
The best collateral is cash in the form of saving accounts, Certificates
of Deposit, treasury bills, etc. These are counted at 100% face value for
collateral purposes. Stock accounts, mutual funds and other variable
investments are counted at 50% to 70% of current value.
Why does a donor need to post collateral?
If the net policy cash value falls below the loan amount, more
collateral may be required. The strategy strives with conservative initial
projections to come as close to the expected future results as possible.
What if a proposed insured is medically rated?
Once the producer receives the medical underwriting results from
various carriers, he/she will do a final policy and financing illustration.
The client then has another opportunity to see exactly what the
insurance and financing costs are and can then decide whether to
proceed or not.
What is the review procedure on the policy values and policy loans?
An annual plan review process exists that will keep the insured and
his or her advisors fully up to date on past performance and future
projections.
What is the exit strategy?
The strategy strives to have the premium loan repaid from the policy
cash values during the insured's lifetime. Otherwise the premium loan
will be repaid via the death benefit.
"Interested in learning more about this program? Feel free to post your questions or comments here. Or you may directly email me now." --Karl Ohrman, President
( This document is not an offer to sell life insurance or make representations about your organization's ability to take advantage of this strategy. It is merely a summary description of a program oï¬ered by the MAF Companies and the Penn Mutual Insurance Company.)