The Giving Insurance Contract

OVERVIEW

 

Description

Whereas the Buffet-Gates Giving Pledge initiative is a moral, non-binding manifesto, The Giving Insurance Contract is a binding promise, issued by an insurance company with strong credit, that collectively insures (a) five of the world’s wealthiest philanthropists who have signed The Giving Pledge and (b) five nine figure millionaires who have not signed The Giving Pledge, to pay out a five billion-dollar settlement to charitable beneficiaries designated by each insured. The goal of The Giving Insurance Contract is to increase giving by nine figure millionaires who have not fully expressed their giving potential and will likely not accumulate the requisite wealth to sign The Giving Pledge in the foreseeable future.

Purpose Statement

The Giving Insurance Contract is a initiative that will inspire nine figure millionaires to accelerate lifetime giving and allocate more of their estate to charity than might be the case absent the contract.

Donor’s Economic Benefits

  • Lowest possible cost for permanent insurance
  • No medical exam
  • Contractual iron clad guarantees
  • Zero commissions, fees and loads
  • Medically impaired donors can participate at preferential rates
  • Proprietary financed premium program minimizes cash outlay
  • Net outlay reduced by charitable income tax deduction

FREQUENTLY ASKED QUESTIONS

 

What is The Giving Insurance Contract?

A binding promise, issued by a large insurance company with strong credit, that collectively insures (a) five of the world’s wealthiest philanthropists who have signed The Giving Pledge and (b) five nine figure millionaires who have not signed The Giving Pledge, to pay a five billion-dollar settlement to charitable beneficiaries designated by the insureds. The goal of The Giving Insurance Contract is to increase giving by nine figure millionaires who have not fully expressed their giving potential and will likely not accumulate the requisite wealth to sign The Giving Pledge in the foreseeable future.

Why Participate in The Giving Insurance Contract?

The Giving Insurance Contract complements The Giving Pledge. Participation in The Giving Insurance Contract will enrich The Giving Pledge experience. Prior to joining The Giving Pledge, most signers already committed to giving away a majority of their wealth during their lifetime or at their death. Clearly, for these individuals, The Giving Pledge is a manifesto that hopefully will inspire others to give away the majority of their wealth sooner than later.

The Giving Insurance Contract translates hope into certainty. Each of the five insured nine figure millionaires who have not signed The Giving Pledge will be asked to (a) increase their annual giving by the greater of $10 million or 200% of the 3-year average and (b) pledge to give away a majority of the remainder at their death. By persuading nine figure millionaires to give more away faster, The Giving Insurance Contract translates the hope of The Giving Pledge into certainty. Assuming the group’s consensus, these nine figure millionaires would be invited to attend events sponsored by The Giving Pledge where families periodically come together to think big in non-conventional ways to attain even greater results.

How does The Giving Insurance Contract Work?

A concentration risk premium would typically be tacked onto a super-sized charitable policy that insures only one individual. However, because The Giving Insurance Contract insureds ten individuals, this concentration risk is substantially eliminated and the pro rata premium allocable to each insured is reduced.

The net return on required premium outlay may be enhanced by electing the “Capital Maximum Strategy (CMS)”, an optional method of financing premiums.

An indication of interest has been received from an insurance company with strong credit to underwrite a policy that guarantees to pay out $5 billion in charitable proceeds.

Staged payouts occur after 3, 5, 7 and all 10 insureds are deceased. The size of these payouts is determined by actuarial formulae.

What Economic Benefits Are Realized by The Giving Insurance Contract?

Lowest possible cost for a super-sized permanent policy.

Zero commissions, fees and loads.

Participants pay a pro rata share of the annual premium to guarantee a payout to designated charities – no other deferred giving option comes anywhere near this level of giving.

If the premium is financed, all or a majority of the pro rata premium can be tax deductible in the year the premium is advanced by the lender on behalf of the insured. The tax benefits of this charitable deduction will likely exceed the annual interest outlay in the earlier years of the contract. Premium financing is optional.

Guaranteed issue (no medical exam).

Contractual iron clad guarantees.

Designated charities receive the $5 billion proceeds in stages.

Stimulus for collaborative philanthropy that goes beyond individual targets and multiplies the impact of The Giving Pledge.

Hypothetical Example (for simplicity, assume 10 equal shares)

With The Giving Insurance Contract, $200 million controls $500 million to charities of choice. With the average annuity, a $200 million gift only multiplies to $300 million (or less). Insured participants may pool interests to tackle a particular cause or endow specific charities – multiplying the impact of their gift by an X factor.

About Lis4cg

Offers outside the box solutions for extraordinary entrepreneurs who strive for measurable impacts with their charitable estate.

Believes that innovative finance can be employed in a conservative manner to awaken the charitable heart by delivering a structured payout that fulfills our highest ideals while inspiring other philanthropists to give away more of their estate.

Has facilitated hundreds of millions in charitable gifts with creative structured financing.

Disclosures and Representations

Lis4cg has received an indication of interest from a large insurance company with strong credit to underwrite a $5 billion charitable policy on multiple lives. Preliminary pricing, pay outs, and contract provisions will be ascertainable after indications of interest are received on ten insureds.

The Giving Insurance Contract is an evolving concept to be fully designed with each insured’s collaboration and in recognition of individual and collective philanthropic aims.

Inquiries may be directed to Rick Weinstein, President, Life Insurance Services for Charitable Giving at 310.854.2560 or email hidden; JavaScript is required. Visit www.Lis4cg.com.


LETTER OF INTRODUCTION

Lis4cg White Background

May 17, 2016

Mr. William A. Ackman
Pershing Square Capital Management, L.P.
888 Seventh Avenue, 42nd Floor
New York, NY 10019

Dear Mr. Ackman:

You signed The Giving Pledge in the hope that doing so will influence others to give away more during their lifetime or at death. The goal of The Giving Insurance Contract is to increase giving by nine figure millionaires1 who have not fully expressed their giving potential and will likely not accumulate the requisite wealth to sign The Giving Pledge in the foreseeable future. The accompanying overview differentiates The Giving Insurance Contract from an ordinary insurance pitch.

My personal story entails leveraging a $15 million giving insurance contract into a $1.5 billion current and deferred giving result for a non-profit health care system2. It would be a rewarding experience to work with you and other signers of The Giving Pledge with the aim of helping nine figure millionaires give away a majority of their wealth during their lifetime or at death3.

If you are open to considering a leadership role in The Giving Insurance Contract, please feel free to call me on my cell at (310) 854-2560.

Sincerely,

Rick Weinstein, President

1 – 1,826 individuals from across the world have personal 10-figure fortunes, according to the Forbes World on Billionaires list released in March 2015. They controlled an estimated $7.05 trillion. In the U.S. alone, Forbes estimates that there’s nearing 450 American billionaires. 5,000 U.S. households are worth $100MM+. China follows with more than 1,000 ultra-rich households. This top segment is expected to be the fastest growing, in both the number of households and total wealth – Forbes Jun 15, 2015

2 – Visit the case study at Lis4cg.com. Click on “The Giving Insurance Contract”.

3 – Credit Suisse Research Institute reports 128,200 individuals worldwide with net assets exceeding $50MM, 45,200 worth at least $100MM, 20,522 worth at least $300MM and 4,300 that have assets above $500MM.


CASE STUDY

In December 2005, while I was employed as a consultant to a mid-size family office, the founders funded a $5 million charitable trust. In the years leading up to this gift, the founders seeded their private foundation with $10 million and made several additional $1 million to $2 million pledges towards education. When the charitable trust was finalized, the patriarch told me, “this gift is going to do it for a while”.

Eight months later, the patriarch asked me to devise a $30 million gift benefiting the same health-care enterprise. At the time, this $30 million gift constituted the largest individual gift in the hospital’s history. The gift was publicized to kick off a $1 billion campaign for infrastructure and endowment. $15 million of the $30 million was a joint life insurance policy on the husband and wife. Of the remaining $15 million, $3 million was payable up front and $12 million, including the above mentioned charitable trust, was payable in annual installments.

The charitable life insurance policy was also guaranteed meaning that as long as the donor paid the annual premium, the issuer would guarantee a $15 million payout at the death of the last survivor, regardless of the policy’s investment performance. To backstop the donor’s promise, the pledge was guaranteed by the donor’s sizable trust estate. Inspired by Abraham Lincoln’s view on brevity, I drafted a relatively short eight paragraph, double spaced, pledge agreement in layman terms that was expeditiously signed by the parties. The $30 million gift was announced in December 2006 at a gala gathering attended by over 700 patrons.

In part due to the gift along with his business acumen, the patriarch was invited to serve as Chairman of the Board of Trustees and to co-chair the $1 billion capital campaign. Over the next four years, the campaign exceeded its original $1 billion goal and went on to raise $1.5 billion, thanks in no small part to the generosity of the affluent citizenry of this fine Midwest community.

In conjunction with the $15 million policy, the donors “banked” a second $15 million guaranteed policy owned by and payable to their private foundation. This policy would be used to fund future planned gifts. The family “employed” life insurance because the financial instrument was guaranteed, was predictable and was tied to an inevitable event — their death. Apparently, the idea of disbursing a large sum of capital to their favorite charity at the exact timing of their death had some sort of “spiritual overtone”.

In early 2007 after the hoopla subsided over the $30 million gift, I sat down with an executive at American Imperial Finance Credit Corporation, at the time, wholly owned by American International Group, to discuss an idea I had to expand the charitable book of business. AIG had already committed to a marketing joint venture with the firm my insurance partner founded in 1995 called Capital Maximum Strategy (“CMS”). CMS pioneered premium financing for life insurance and has gone on to place over $30 billion of life insurance with a multi-billion dollar float. As fate has it, the collapse and subsequent government bailout of AIG put the lid on The Giving Insurance Contract.

Inspired by the Buffett-Gates Giving Pledge, in June 2011, I emailed a high profile executive of a large reinsurance company to test their appetite in underwriting an unprecedented $5 billion charitable policy. This executive called me back the next day, which I took be a positive sign. However, a subsequent phone call with a colleague on his underwriting team identified an obstacle known in the industry as concentration risk. I learned that concentration risk is unique to super sized policies and that this risk must be tacked onto the “standard” premium to compensate the insurer if they guess wrong on longevity on a big bet. Stymied by this hurdle, I tabled the idea.

Eventually, the solution came to mind which was to underwrite a policy on ten insured individuals which would ameliorate all concentration risk. I then revisited the Giving Pledge in 2016 to see where this initiative stood. As I read each pledge letter, it became obvious that for most pledgers, the idea of bringing together billionaire philanthropists was to create an example where others could be inspired to give away more and sooner. Perhaps absent The Giving Pledge, these other philanthropists might not be inspired to act as visibly and with as a great an urgency.

Seeing that The Giving Pledge is about leadership and commitment, I have structured The Giving Insurance Contract to stimulate additional giving and to do so in a manner that can be measured and determinable. If one $15 million policy could be employed ten years ago to stimulate $1.5 billion in giving, how much giving might be stimulated using a $5 billion policy? I am hoping there are a few billionaires members of The Giving Pledge who may be interested in testing this thesis.

END OF CASE STUDY


NOTABLE QUOTES FROM PLEDGERS TO THE GIVING PLEDGE

 

The person who is afraid to take risks and make mistakes will never achieve anything of which he or she is capable. That is because failure is the marker that tells us when we have reached our limits. One of the five greatest mistakes you can make in life is to be continuously afraid you will make one.

Charles E. Smith (d. 2009) – Robert Kogod’s brother-in-law and business partner

♦     ♦     ♦     ♦     ♦

The catch phrases that drive my life and philanthropy include: Enjoy every day; Think outside the lines; Risk, learn and grow; Ideas are easy, execution pays off; Constantly improve; Admit mistakes, fix them and move on; Problems are opportunities; Hard work makes winners.

Peter B. Lewis (d. 2013) – Chairman & CEO @ Progressive Corporation

♦     ♦     ♦     ♦     ♦

Believe me, I know — doing something good in this world is better than the best earnings quarter report you will ever have in business. When your profit line is measured by the lives you have saved, or the children you have helped, or the needs you have met, you can never have red ink.

Bernie Marcus – Co-Founder: Home Depot and Chairman: The Marcus Foundation, Inc.

♦     ♦     ♦     ♦     ♦