Gifts of life insurance policies to not-for-profit organizationscan benefit both the organization and the donor, the latter in the form of an often sizeable income tax deduction. However, under the newrequirements of the Pension Protection Act of 2006 (PPA), determining the fair market value of policies will require the help of an appraiser with the appropriate expertise and experience.



* Cash-value policies, such as whole life, are valued at fair market value, limited by their cost basis. A paid-up policy is valued at its replacement cost. A policy that is not fully paid up is valued atthe lesser of premiums paid or its interpolated terminal reserve amount.



* The PPA now requires non-cash charitable contributions to be appraised by a qualified appraiser according to generally accepted appraisal standards. The Uniform Standards of Professional Appraisal Practice (USPAP), developed by the Appraisal Standards Board of the Appraisal Foundation, is considered as satisfying this requirement.























* A qualified appraiser is one who, among other things, performs appraisals regularly and is qualified by experience, education and other factors to appraise the type of property in question. He or she must have earned an appraisal designation from a recognized professional appraiser organization or meet minimum requirements for education and experience. For returns filed since February 2007, such education includes relevant college or professional-level coursework. Experience must include at least two years of buying, selling or valuing similar property.























* In addition, the PPA increased taxpayer penalties for appraisalsthat cause a tax understatement.Not everyone can make a multimillion-dollar bequest to his or her alma mater, but many alums have an insurance policy for which they might easily be persuaded to name their school or another not-for-profit organization as owner and beneficiary.























University development offices and other prospective nonprofit beneficiaries are well aware of this, and many encourage gifts of policies. What they and prospective donors might be less sure of--and consequently need your help in deciding--is how to properly value donated life insurance interests for tax purposes. And you may need to brush up on the new provisions for qualified appraisals under the Pension Protection Act of 2006 (PPA).















Qualified appraisals are a concern for taxpayers donating noncash charitable gifts of all kinds. The questions of appraiser qualification and responsibility remain an area of concern for the IRS due to a long history of valuation problems dealing with gifted life insurance. Life insurance can be prone to incorrect valuation because of the plethora of types of policies available, ownership and beneficiary issues and misunderstanding of valuation methods of how to apply fair market valuation principles.





Many CPAs may be more attuned to providing an estimate of the value of business interests and other types of assets rather than those required for life insurance policies. This article, therefore, is intended to help you and your clients navigate this murky mine field and offers suggestions on how to find a qualified appraiser who can complete and sign the revised Form 8283 for charitable donations of life insurance interests.



THE COMMODITY ITSELF















For donors, gifted life policies can be a Pension Protection Act forces appraisers of donated source of tax deductions and can help meet estate and personal financial planning objectives. In some cases, these policies also allow for the building of a less costly legacy with worn-out assets that may no longer be needed. More than 70% of lifeinsurance policies, including group and secondary-market policies, lapse for nonpayment because they no longer meet any pressing estate planning or business planning needs. As noted by the Insurance Information Institute (www.iii.org), a per-year lapse ratio of 7.7% (38.5% lapses in five years) is the industry standard, down from 8.75% per year for the period 1995-2000. Additional material suggests the lapse rate is 3% per year for individuals over 65.















DEATH, TAXES AND PLANNED GIVING















Both these superannuated as well as newly written life insurance policies are a great source of new money for not-for-profits. Empirical mortality tables have the uncanny knack of being correct. It's not a matter of whether the insured is going to die, it's when, and if the portfolio of policies is sufficiently diversified, we even know what year that might be within a reasonable margin. Regardless of whether the policy is term insurance, some form of cash-value insurance, assignable old group policies or even the senior settlement payouts from the secondary market, life insurance is a viable tool to the planned-giving community.















In general, the deductible amount of a donated life insurance interest is its fair market value, which is the amount an insurance company would charge for a comparable contract. If the policy has a cash surrender value, that amount is considered the fair market value if the donee intends to cash out the policy rather than hold it as an investment. Otherwise, for fully paid-up whole-life polices, fair market value is considered to be replacement cost. A policy that is not fully paid up is typically valued at the lesser of either total premiums paid or the "interpolated terminal reserve," an amount designated by the insurer to fulfill its obligations under the contract. It is similar to the cash surrender value and is available from the insurer. Inany case, however, the value can be no greater than the policy's cost basis. A term insurance policy's value is typically the amount of future premiums that would be paid to maintain the policy.

Every year in this country, roughly $2 trillion in life insurance lapses. That means the policyholders receive nothing at all from their life insurance companies, despite years of making premium payments! Another $350 billion in policies are surrendered to insurance companies each year for a tiny fraction of their fair value. Don't let this happen to you! Through the Life Settlement process, you can receive a large cash payment for your policy, often 4-6 times the cash surrender value offered by your insurance company. Even policies that offer little or no surrender value may be sold for a significant cash settlement.







There are many factors that influence your Settlement amount, including: your age and health, type of policy, its face value and premium amount. Fast Life Settlements will help identify what your policy is worth and can assist you in receiving the highest possible Settlement payment.















The decision to sell your life insurance policy should be made with care. It's a milestone in one's life, similar to selling a house you've lived in comfortably for many years. Like that house, your policy may now be too large or too expensive to fit your current needs. Rather than maintaining such a costly asset, it may be smarter to sell your policy now, thus converting its stored value into current cash.







There are many sound reasons to sell one's life insurance policy. They include: the high cost of premium payments, declining health, a desire to buy a second home or take a dream vacation, the wish to fund educational expenses for yourself or a family member, or a need to rebalance your investment portfolio. Simply put, any requirement for immediate cash may be a sound reason to consider selling your life insurance policy.

Fast Life Settlements makes it safe, simple and convenient to sell your life insurance policy. . . We start by answering all your questions in a free, no-obligation, telephone consultation. We then process your confidential application, which includes your authorization to obtain necessary medical and insurance records. You'll be pleased to learn there are no medical examinations, and no administrative tasks for you to perform.















On your behalf, FSL then obtains formal price quotes from one or more institutional investors, based on the specific characteristics of your policy, age and health. Upon acceptance by you of the highest bid, a Purchase and Sale contract is prepared and a third-party escrow account is established—for your protection—until Settlement funds are transferred to you.

You'll be pleased to know there are no out-of-pocket costs for any of Settlement services! From your first conversations with a Fast Life Settlements professional, through the evaluation of what your policy is worth, and right on up to the funding of your settlement payment, you will not lay out a single penny for our assistance.When—and only when—you finalize the sale of your policy through Cresta and receive your Settlement payment, a commission is paid to FSL by the buyer of your policy. This payment will be disclosed to you and will not reduce the payment amount you have been promised. That amount will never be reduced.

While making such determinations may seem unsavory, ... “The reality is we have to make these comparisons, and we either do them implicitly or explicitly,” said Dana Goldman, director of health economics at the RAND Corporation...

To make the process more explicit, economists want to compare the cost-effectiveness of different treatments in a single measurement, one that doctors and policy makers will trust enough to use.

So, how much is your life worth? You may think the answer is infinity, that no amount of money could compensate you for the loss of your life. But people do put a price tag on their existence. Workers accept riskier jobs for higher pay, for example. And the rich tend to think their lives are worth more than poor people’s.

Studies of real-world situations produce relatively consistent results, suggesting that average Americans value a year of life at $100,000 to $300,000, said Peter J. Neumann ... at Tufts...

If money could buy happiness, how much would it take to bring it back after the death of a partner, child or spouse? Most of us would be loathe to assign such a value, if not offended by the question, but two economists have attached such dollar values to deaths by comparing the way that lost loved ones lower scores on happiness surveys with the way that greater incomes boost scores. More than just a gruesome exercise, they say they hope it will provide courts with a way to more fairly award damages

So a year of life is worth at least $100,000. But that figure only begins to answer the question of what health is worth. ... [M]ost medical care has a ... modest goal: back surgery is performed to relieve the pain..., and drugs are given to lift depression or end an asthma attack more quickly. Those treatments are meant to improve — not necessarily to save — lives. Can their value actually be compared?