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  • 1.  Gift of life insurance with the intent to cash out

    Posted 01-30-2023 11:48 AM
    Last month, a donor made us the owner & beneficiary of their life insurance policy, with the intent that we cash out the policy immediately for the purpose of funding a project we were soliciting them for.  We agreed to this arrangement, and have now received the check resulting from cashing out the policy.  We haven't made any entries yet.

    My question is, do we have the choice of either option, ie either 1) record this as a planned gift and then actualize it immediately or 2) record the check as an outright gift.

    Because the life insurance gift was made with the intent and agreement that we cash surrender it immediately, it seems it's possible to go either route, but I'm wondering if there is a reason we'd have to / should go one route or the other.

    Thanks!

    --
     Gwen Donev

    Director of Advancement Services

    Gustavus Adolphus College

    800 West College Avenue

    Saint Peter, Minnesota 56082

     

    Email:  gwendonev@gustavus.edu

    Office:  507.933.6515



  • 2.  RE: Gift of life insurance with the intent to cash out

    Posted 01-30-2023 12:15 PM
    Gifts of life insurance are not planned gifts. They are current assets and are considered gifts of property by the IRS.

    The gift is the policy - not the cash. It should be recorded as a property gift using the appraised value. The donor must also file an 8283.

    John

    John H. Taylor
    Principal
    John H. Taylor Consulting, LLC
    2604 Sevier St.
    Durham, NC   27705
    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987




    Original Message


  • 3.  RE: Gift of life insurance with the intent to cash out

    Posted 01-30-2023 03:50 PM
    Yes, that makes sense. We do so few of these. Thank you!




    Original Message


  • 4.  RE: Gift of life insurance with the intent to cash out

    Posted 01-31-2023 06:05 AM
    There is one thing I just recalled (as I was writing a policy).

    You became the owner of the policy. Therefore, your Business Office will likely need to record an asset equal to the policy's interpolated terminal reserve (or appraised) value. However, you do plan on cashing this in quickly (a wise move usually unless the donor is quite old).

    So, since you own the asset and are "selling" it, your Business Office will need to account for any difference in the amount booked and the amount realized. This difference is typically entered on the GL (not the Advancement CRM) as either an investment gain or loss.

    How it is handled is not usually your call - but I wanted to alert you to what the Business Office may likely do.

    John

    John H. Taylor
    Principal
    John H. Taylor Consulting, LLC
    2604 Sevier St.
    Durham, NC   27705
    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987





    Original Message


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