Approximately 50% of life insurance policies owned by seniors are allowed to lapse without any benefits being paid out. There are many reasons for this lapse: some can no longer afford the premiums while others feel that they no longer need the proceeds in the event of death.
A recent charitable organization called “Insuring a Better World Fund” (IABWF) was formed to aggregate and administer insurance policies for the benefit of charities. IABWF does not purchase the policies. However, the consumer will be entitled to a charitable deduction based on the fair market value of the donated policy.
There are several criteria which must be complied with before IABWF accepts the policy: the consumer must be above 65, information about health must be provided, policy must have a death benefit value of above $400,000 and the policy must have been purchased more than 3 years prior.
Once the policy is transferred, IABWF will pay the premiums and administer the policy. After the consumer’s death, and after the premiums and expenses have been reimbursed, the death benefit will be distributed to the charities selected by the consumer.
The end result is that the charity receives a substantial amount of money, while the consumer receives a charitable deduction.
Disclaimer: This article only offers general information. Each situation is unique. It is always helpful to talk to a specialized attorney, to figure out your various options and ramifications of actions. As every case has subtle differences, please do not use this article for legal advice. Only a signed engagement letter will create an attorney-client relationship. ATTORNEY ADVERTISING