Insurable Interest for Foundation

[infologicd]

A foundation whose mission statement is to help support Christian Churches financially across the nation would like to provide individual term life insurance to the congregational members of these various churches that it helps support.

Does the foundation have insurable interest to hold the policies of the individuals it insures?

 

[LGilmore]

Who's the beneficiary?

It's just the same as how a business for profit or not, would be viewed. The "mission" has absolutely nothing to do with the situation. Is there a working relationship between this organization and the people they want to insure?

Break it down to the basics.

 

[scagnt83]

There is no need to worry about insurable interest on the foundations part if they are not the owner or bene or payor of the policy. The insurable interest will be between the insured/owner/bene... mainly between the insured/bene.

 

[infologicd]

Thank you for the responses.

Beneficiaries of the policy would be threefold; the individual's chosen family member, the church to which the individual attends, and the aforementioned foundation.

The foundation would hold the policy and be paying the premiums.

 

[LGilmore]

Might be a bit hard to do. There is not an employee-employer relationship so this is stranger owned life insurance. You may have trouble placing this. Does the loss of this person effect the NP? are they paying their wages? Is there an economic loss to the NP if the person dies?

You may find it difficult to show an insurable interest in this case. I mean the NP could also insure a homeless person and allow a portion to a stated beneficiary, more to a shelter and the balance to themselves... doesn't sound all that great when I mention it this way, but how is it different than what is being proposed?

 

[critter]

There is something else going on here that makes my AML radar start to ping.

It also sounds like, with this set up, you are looking to possibly create a taxable event to the families involved.

 

[VolAgent]

There is something else going on here that makes my AML radar start to ping.

It also sounds like, with this set up, you are looking to possibly create a taxable event to the families involved.

Not so much AML as STOLI. Basically, the Foundation wants to profit from the death of its churches' members.

Also yes, the death benefit would be taxable to the families. Although since they weren't paying the premium, it is still free money.

But as to why this wouldn't be allowed. Basically the Foundation is buying insurance on strangers and giving the family and the middleman a cut. It really doesn't matter what the purpose of the Foundation is, they want to profit from the death of strangers.

 

[pcbinsurance]

The church can also "encourage" the members into taking out their own policies naming the church as the beneficiary. The church can "suggest" they take part of the tithe and put it toward the policy.

Sounds christian to me.

 

[VolAgent]

The church can also "encourage" (brainwash?) the members into taking out their own policies naming the church as the beneficiary. The church can "suggest" they take part of the tithe and put it toward the policy.

Sounds christian to me.

I won't comment on the religious aspect of it, but that is how I have always heard of it in the past. Convince wealthy members or maybe even not so wealthy members, to use their tithes or planned bequest to purchase an insurance policy with the church as the beneficiary. I believe there are some planning techniques that can be used to greatly reduce the member's tax burden as well.

 

[LGilmore]

Leaving money for many different reasons to different places usually works pretty well. It is when someone in the church or non profit hooks up with, yea guys, an agent, that it tends to run into trouble. When this stuff goes south, we usually find a single agent writing a butt ton of policies on people who really can't afford it. The plan implodes and somebody might go to jail. (eh, that would be us, because folks, we're going to be the first blamed cause we got paid.) When a business opportunity presents itself and seems to be a slam dunk, make a ton of commissions opportunity.. THINK! Short term money you later have to pay out to a lawyer for your defense is not really commission. It's only commission if you get to keep it.