By David Simon, Co-founder and President of Insuring A Better World Fund
Born in Alabama in June of 1880, Helen Keller lost her sight and hearing at 19 months old. She lived a full life of nearly 80 years as an author, lecturer, political activist, and most importantly, a disability rights activist who impacted the lives of many. She attended Harvard (Radcliffe) and was one of Time Magazine’s Hundred Most Important People of the 20th century.
Helen Keller never let her disabilities define her abilities.
Unfortunately, many charitable organizations, too often let their disabilities define their abilities. Many charities lack the staff, expertise or critical knowledge to accept a variety of noncash gifts. They use this excuse and fail to “meet their donors where they are” and serve the charitable mission they were designed to support. This deprives the most needy, when the resources of the charitable organization are underfunded. Additionally, there are many charitable consultants who fail to aid these charities in finding alternative methods to accept noncash gifts that could bolster the economic impact of the charity.
Professor Russell James of Texas Tech University performed a study of over one million nonprofit tax returns (IRS form 990) for the tax years 2010-2015 and part of 2016 with statistical analysis of the 761,876 forms from 205,696 nonprofit organizations reporting positive contributions. Professor James concluded, in part, that nonprofits raising over $1 Million in 2010 that reported only cash gifts for the period between 2010 and 2015 experienced an average total growth in contributions of 11% over these five years, barely keeping up with total inflation of 8%. In contrast, those reporting any noncash gifts for the period between 2010 and 2015 grew their total contributions, on average, 50% over the same 5-year period. Cash is Not King in Fundraising: Results from 1 Million Nonprofit Tax Returns, Professor Russell James III, JD, PhD, CFP Director of Graduate Studies in Charitable Financial Planning, Texas Tech University.
Yet there are third parties that are able to work with charitable organizations to overcome the disabilities inside of the organization to facilitate the noncash gifts their donors could make to fulfill their philanthropic ideals and promote the charity’s mission. One of the most prestigious of these third-parties is Bryan Clontz’s Charitable Solutions, LLC. Mr. Clontz is a frequent speaker nationally at charitable gift planning events. In 2021, Charitable Solutions, LLC facilitated noncash gifts that were declined by the referring charity totaling $1,177,317,142.00, a remarkable achievement and impact for the philanthropic world. Yet for all the wonderful achievements this offered the charities that work with his organization, that same year there were only 0-4 gifts of life insurance that Charitable Solutions, LLC facilitated.
According to the 2022 ACLI Fact Book, life insurance is a 21+ trillion-dollar asset class. Approximately 88% of life insurance policies lapse without paying a death benefit. It is estimated that over 265,000 seniors lapse over $150 billion of death benefit each year and this trend promises to continue for years to come. This enormous asset class is the MOST UNDERUTILIZED SOURCE FOR PHILANTHROPIC GIVING in large part because of charities’ inability to accept the offered gifts of life insurance.
There are many excuses charities use to deny their donors the ability to fulfill their philanthropic ideals with the gift of life insurance. They include: (1) Charities lack the expertise; (2) Charities’ inability to administer the policies; (3) Charities lack the staff to act as a conduit for premium payments on the life insurance policies being offered; (4) Charities choose not to work with third parties; and (5) Charities choose not to pay premiums for donated life insurance policies.
In fact, the National Conference of Charitable Gift Planners held last year in Reno unfortunately did not have a session on gifts of life insurance. More importantly they have not had a breakout session in the past 10 years on gifts of life insurance, thereby depriving their membership of the opportunity to reach over 2 1/2 million senior policy holders who lapsed their policies totaling over $1.5 trillion of potential death benefit gifts to charity.
Despite protestations to the contrary, most charitable organizations do work with third parties in a variety of ways. Accountants, lawyers, investment advisors, and the like all perform necessary functions for the charity to sustain itself, remain properly licensed, file their annual tax reports and manage their investments. Further, many charities use third party consultants to help with campaigns, marketing and various fundraising efforts.
There are thousands of financial planners/life insurance agents, who have the expertise, knowledge and experience to help charities administer and accept noncash gifts of life insurance. There is a 501(c)(3) charity that will perform all functions for the acceptance of a noncash gift of life insurance, including paying the premiums, managing the policy to maximize its value for the benefit of the referring charity, administering the policy premiums and collecting and distributing the net death benefits to the referring charity.
Life insurance like all insurance works on the law of large numbers. It is prudent for a charity not to pay premiums for an individual life insurance policy or even a small number of policies. Depending on the age of the insureds a charity would have to aggregate hundreds if not thousands of life insurance policies to achieve actuarial credibility. This is an impossible task for an individual charity to accomplish. However, this can be accomplished by aggregating life insurance policies from several charities into a single portfolio of policies, analogous to a life settlement fund.
In short, there is no excuse left for charitable organizations to fail to accept noncash gifts of life insurance and access this $21+ trillion asset class for the benefit of the people they serve and the donors who support their organizations.
A suggested policy for noncash gifts of life insurance policies in its simplest terms would be:
“We make every effort to meet the donor where they are and accept noncash gifts of life insurance. For smaller gifts of policies, death benefit of $100,000 or less, we accept only paid-up policies under the guaranteed assumptions of the policy or those policies with cash value exceeding $1000. If the policy is not paid up we will cash in the policy for its cash value upon receipt of the donation. For gifts of larger policies, those with a death benefit exceeding $100,000, we accept paid up policies, policies with cash value, policies where the donor agrees under an advance agreement to pay the premiums and existing policies with value as determined by us (if the charity has expertise and administrative staff to service the policy) or a third party with the expertise and servicing capabilities. We can also accept existing policies with value through a third party charity where the donor and our charity will NOT pay the premium or service the policy.”
Helen Keller in a speech to the Massachusetts Association in 1927, stated “He who is content with what has been done, is an obstacle in the path of progress.” I urge all charities to overcome their disabilities and meet their donors where they are and serve their mission with noncash gifts of life insurance. Let Helen Keller serve as a shining example of what can be achieved despite obstacles in our path. Together we can ensure a better world for us all.