NONPROFITS — Frequently Asked Questions About the Charity Capital Funding Plan ®

These Frequently Asked Questions are prepared to address issues about which supporters and nonprofit executives are most often concerned as nonprofits invite supporters to attend orientation meetings and as they acquaint supporters with the Charity Capital Funding Plan®.

What is the Charity Capital Funding Plan®?

The Charity Capital Funding Plan® is a unique fundraising program that uses charity-owned life insurance to produce a charitable benefit. Policies on supporters serve as collateral for a financing transaction that provides initial capital to your charity and creates a long-term source of funds.

Will I be required to pay any portion of the cost of insurance?

No. All life insurance premiums and all costs are paid from financing proceeds and policy benefits. You simply let your non-profit purchase an individual life insurance policy on you.

Will my charity be required to pay any portion of the cost of insurance?

No. All life insurance premiums and other expenses related to the plan are paid from financing proceeds and policy benefits.

How will my organization pay for the life insurance premiums and other expenses?

Policies are combined to create a pool of policies. A third-party lender loans money to an entity (owned by your organization or jointly with other charitable organizations) to pay for the cost of premiums and the expenses associated with the plan. The lender takes a security interest in the pool of insurance policies and is repaid as the policies mature. Benefits from the policies will also be used to pay insurance premiums and other expenses related to the plan.

Will the assets of the organization I support be placed at risk?

No. The assets of your organization (other than the policies and the policy benefits) will not be subject to any pledge, assignment, lien or guarantee with respect to any financing.

What will my organization receive as a result of its participation?

Your organization will receive a payment at closing after the life insurance policies are funded and the expenses paid. These funds come from the outside lender that makes the entire project possible. In addition, once the loan from the third party lender is fully repaid, your organization receives any remaining net policy benefits.

Will my participation in the plan affect my ability to obtain life insurance in the future?

There is a limit to the amount of life insurance that insurance companies will issue on any given person based on insurance company-specific underwriting guidelines. Your participation in the plan should not prevent coverage for usual personal or other estate planning needs in the future because any insurance policy written on you will be owned by your charity, not you. Still, you should understand that some life insurance companies will conclude that a portion of your personal insurance capacity has been utilized. Most consumers, however, never reach their maximum insurance capacity.

If I apply for a life insurance policy and am declined, will my eligibility for life insurance be impacted?

As with any application for life insurance, your application under the plan will go through an underwriting process. If your application is declined, the fact that you applied for a policy and were not accepted may be included in a national database that is shared by insurers. Because the underwriting process was based on very limited information and no medical underwriting, a declination of coverage may not affect your ability to obtain life insurance for usual personal or estate planning needs. But you should understand that there is a risk, just as with any life or health insurance application, that a declination could impact your eligibility for individual insurance products for personal needs in the future.

How many individual members of the Charity can participate in the Charity Capital Funding Plan?

All eligible supporters of your organization may apply for life insurance policies and consent to their lives being insured. Please note that some supporters’ applications, including yours, may not be accepted, and thus, may not be included in the group of policies ultimately purchased by your organization.

Will I be required to have a medical exam?

No medical exam will be required.

Will I be eligible for a tax deduction as a result of my participation in the plan?

No, you will not be able to claim a tax deduction.

Will my estate receive any proceeds or benefits under any life insurance policy that may be written on my life?

No. Your estate will not receive any proceeds or benefits under the policy because the organization you support (or an entity owned solely by your organization and other charities) will be the only beneficiary.

Is my organization working with a secure, stable insurance company?

Yes. Your organization is working with an insurance company that has been issued an “A (Excellent)” or better rating by A.M. Best.

Is the Charity Capital Funding Plan ® too good to be true?

No. The Plan has already been successfully implemented for the benefit of several charities. While past results are not necessarily indicative of future results, one charity with approximately 1,000 policies received over $2 million at closing and is projected to receive approximately 15% of the policy benefits over the life of the program.

THIS IS NOT AN OFFER OR SOLICITATION TO PURCHASE AN INSURANCE POLICY. IT IS AN EXPLANATION OF HOW TO PARTICIPATE IN A PROGRAM TO SUPPORT YOUR CHARITY.