FAU fundraisers could follow Oklahoma State University’s lead in buying life insurance policies on donors.
BOCA RATON – Florida Atlantic University’s foundation will explore an innovative fundraising plan in which life insurance policies are taken out on donors who make the school the beneficiary when they die.
Foundation Chairman Les Corley said his board will look into the life insurance program, which was introduced as a fundraising tool by Oklahoma State University in March, as it revamps its gift policies for the first time in at least eight years.
It’s not unusual for donors to name alma maters as life insurance beneficiaries, but Oklahoma State’s plan is believed to be the first where the school actually purchases the life insurance and pays the premium until the donor dies.
Oklahoma State initiated the plan with the purchase of $10 million policies on 28 donors age 65 to 80.
Since then, universities throughout the country have pursued similar deals, which rely on the donor dying before the school has paid too much in premiums.
”Seventy-five foundations are looking at it right now. We would be remiss not to look at it,” Corley said.
Barry Kaye, a multimillion dollar FAU donor, life insurance salesman and member of the FAU Foundation board, said in April he would personally be responsible for raising $100 million if the school agreed to use an insurance plan he developed.
But FAU spokesman Kristine McGrath said Monday that FAU President Frank Brogan has had no discussions with Kaye about the plan. Kaye is a leader in the life settlement industry, where third-party investors can buy the life insurance policies of elderly people and cash in when the person dies.
Oklahoma State’s plan is considered less controversial because the university has an ”insurable interest” in the person they are buying the plan for, such as a donor or alumni.
Several schools and nonprofits are working with Atlanta-based Highland Capital Brokerage, on plans similar to Oklahoma State’s.
J. Kavanaugh Tucker, a vice president with the firm, said he warns schools there is risk associated with the plan because donors may live longer than expected, leaving the school paying a premium for many years.
”Schools take out loans to buy a death benefit and if the person lives too long, the loan balance can be more than the death benefit,” Tucker said.
The FAU Foundation, which raised $42.5 million in cash, pledges, and state matching grants last year, is gearing up for a capital campaign.
It formed a new Fund-raising Policy Committee to revise foundation gift rules and address areas such as gifts of tangible personal property, life insurance and intellectual property.
The committee will also consider FAU’s policy of naming buildings or other campus facilities after donors. Lawmakers gave schools more leniency in that area earlier this year.
”We have operated on a very antiquated policy,” said Ken Jessell, FAU vice president for finances, during a board of trustees meeting last week. “This is the most important policy adjustment in the past several years for the foundation.”
Source: Miami Herald
