planned giving officer training

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!

Planned Giving Ethics – Merrill Lynch Case Part 1

As mentioned last week (see ), there was a recent court ruling out of the State of Delaware regarding a really botched charitable remainder trust situation.

Rather than trying to review the entire case in one post, I plan on writing short posts related to the many ethics issues raised in the case. In other words, I think the case itself is great for training purposes – getting accustomed to the nuances that we planned giving officers should be aware of, but the ruling itself should have little or no impact on the field.

If you try reading the case (, you’ll see some nice biographical info on the victims but here is my short version (at least the relevant facts):

Husband and wife (she is 75 and he is 10 years or more older) save over $800,000 in Esso/Exxon stock from his career, their nest egg. At some point, the husband comes to rely on a Merrill Lynch broker and instructs his wife (not typically involved in the family finances) to stick with this guy’s advice when his health starts to deteriorate. Sadly for this family, the wife listened to her husband on this issue and followed the advice of the Merrill broker to put their entire Exxon stock nest egg into a 10% Charitable Remainder Unitrust (CRUT), income for lives of husband and wife, and then to their 3 children, before eventually distributing remainder funds to 5 charities in approximately 50 years. This was finalized in 1996, before the 10% remainder rule came into effect – their deduction on this $840,000 CRUT was less than $10,000.

The first lesson: A Merrill Lynch stock broker, or any other stock broker or insurance salesman or financial planner, is NOT YOUR ESTATE PLANNING ATTORNEY. Even if he has a law degree or even practiced estate planning law. He is a salesman who is selling products or investments. Your attorney is someone who represents only YOUR interests, not the interests of the commissions to be had from selling various products to you.

In other words, beware of Merrill Lynch guy’s estate planning advice.

In truth, this also applies to planned giving officers.

The take way for planned giving officers is to remember and communicate that donors need independent counsel, their own attorneys, to review various plans that have any impact on a donor’s estate. Educate your donors not to rely on you or their Merrill Lynch stock broker for estate planning, especially significant parts of an estate.

To be continued.