Anatomy of a Successful Insurance Gift

After recent posts regarding insurance gifts – both good and bad – I thought we would conclude the topic on a positive note because so much of planned giving is about being open and receptive to the possibilities.

The following are answers to my questions to Josh Rednik, the Executive Director of the MetroWest Jewish Community Foundation which recently announced a $20 million insurance gift from one of its major supporters.

Here are my questions and Josh’s answers noted by [JWR] and in bold and italics:

Was it a new or old policy?

[JWR] Existing policy that was owned by the donor’s private foundation.

Any premiums still due?  If so, is there borrowing being done to pay premiums or is the donor just paying?

[JWR] No premiums due.  The donors and I have a letter from the carrier stating as much.

One or two lives?

[JWR] Two lives, survivorship.

Whole or universal life?

[JWR] Universal.

Is the Metrowest Community Foundation the actual owner? Or does the donor’s privation foundation still own the policy?

[JWR] JCF MetroWest is the owner and beneficiary, though according to our agreement with the donor family, the proceeds will be transferred from JCF to the family’s supporting foundation at JCF when the policy matures.

Any other charities involved?

[JWR] Possibly.  Total death benefit is $20 million.  When the policy matures, the full proceeds will be transferred to the family’s supporting foundation at JCF.  According to our agreement with the donor family, a minimum of $10 million will stay in that foundation and will function like an endowment, to be used to support a limited array of programs focused on Jewish continuity and identity development. 

FYI, the same family is already on the books for a current commitment of $5 million to that supporting foundation.  That amount is payable over five years and we’re now in year three, there’s a little over $3 million in the fund as of today.  The fund operates like an endowment. 

The $10 million that is designated will be added to corpus and generate larger annual distributions in the future. 

The use of the other $10 million in insurance proceeds will be subject to the discretion of the supporting foundation trustees.  It could stay in the family fund and be used for similar programmatic purposes, making endowment-like distributions, or it could be used to support other charities that the primary donors might request in advance.  We’ll see about this long into the future…

Anything exotic going on?

[JWR] Not really.

How did it come about?  Was it a suggestion by staff?  by the donors? by the donors’ financial planner/insurance salesman?

[JWR] Good question.  It came about for a variety of reasons. 

First – trust.  I’d like to think that over the past few years, we have created a trusting relationship with this family, upon which all of this is predicated. 

Second – role of professional advisors.  I have a strong working and personal relationship with the donor family’s insurance planner and it was he who first suggested to the family that they consider JCF MetroWest as a recipient of this policy.  Without his suggestion, this contribution would not have happened.  I also know the family accountant and he was involved in this discussion/negotiation as well.

Third – patience.  Discussions on this possibility began over one year before the commitment came to reality, and there were many conversations, emails and letters exchanged in an effort to clarify and document how everything would work.

I think the big takeaways are:  (a) focusing time on getting to know your major donors and helping them engage in the philanthropy they seek is critical; (b) building trusting relationships with professional advisory community is equally critical.

Fundraisers should have a lot to think about here and thank you Josh for being so candid about this one!

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