What is a life insurance life settlement, and how can it benefit you and WashU?

Did you know that you may use a life insurance policy you no longer need to support WashU? Over the years, you may have purchased life insurance to protect family members or a key employee, or as a vehicle to provide liquidity for estate taxes. As life evolves and laws change, it is a good practice to review your policies to determine if they continue to fulfill their intended purposes.

A life insurance life settlement is an attractive option for qualifying life insurance policies that no longer fit your personal needs. Oftentimes, when a life insurance policy is no longer needed, policy owners either abandon the policy and stop paying the required premium, or surrender it to the carrier. In either situation, the insurance carrier wins. A life settlement provides policy owners the potential to receive a much larger cash lump sum than what is provided by the life insurance carrier’s cash surrender value. The cash from the life settlement can be retained or used to support WashU and other charitable organizations.

Life settlements are not a new alternative for policy owners. The current “life settlement” concept can be traced back to a 1911 court decision that found that life insurance should be treated as personal property and be permitted to be bought and sold. The process has matured over the past 100-plus years. Today, third-party institutional buyers have emerged to acquire ownership of policies in exchange for paying the owner a lump sum of cash. In turn, the policy owner is no longer obligated to make future premium payments. The policy buyer then owns the life insurance policy, takes on the obligation of future premium payments and receives the full death benefit payable from the life insurance carrier when the insured passes.

On average, the most successful life settlement transactions are with policies where the insured is age 65 or older. Life settlements for individuals younger than age 65 typically involve a health impairment to be eligible for a life settlement. While all policy types (term, whole life, universal life, and others) may be considered, the value of the policy along with a number of additional factors will determine if your policy will qualify for a life settlement.

The Planned Giving staff is available to assist in evaluating life insurance policies to determine if there is value that may be used for charitable purposes:

1. Contact the Planned Giving team. We will gather information on your policy and provide a report outlining potential life settlement options or other ways to use the policy for charitable purposes.
   
2. Discuss how you would like the proceeds to be used.
   
3. Transfer ownership of the policy to WashU.
   
4. WashU will facilitate the life settlement transaction for the policy and proceeds will be directed to the university to support the purpose you designate.
   
5. An independent appraisal will be conducted to determine the charitable deduction for
   your gift.

We invite you to learn more or speak with a member of the Planned Giving staff.

This information is not intended as financial, legal or tax advice. For such advice, please consult an attorney or tax adviser.