May 3, 2007 | Read Time: 1 minute
Oklahoma State University has secured $280-million by buying life insurance on some of its athletic boosters The Chronicle of Higher Education reports in its May 4 issue. And now at least 40 other institutions are trying to copy the approach, the newspaper says.
The strategy seems clever, says Jack Siegel, a Chicago lawyer. But on his Charity Governance blog, Mr. Siegel questions both the legality and the investment value of such arrangements.
Mr. Siegel writes that there is an obvious legal question about whether donors are an insurable asset for a college or university.
He also wonders whether institutions such as Oklahoma State would be better off investing their money in the market than buying life insurance — especially since life-insurance companies are in business to make money from premiums.
“This proposal seems to be catching on because it looks sophisticated, but we wonder whether it is just plain dumb,” Mr. Siegel writes. “If we were on the board of a charity, we would proceed with extreme caution. We also would want a legal opinion that somehow these transactions didn’t produce unrelated business income.”
In an article about Oklahoma State in March, The Chronicle of Higher Education noted that lawmakers have raised concerns about charities buying life insurance on donors.
Does buying life insurance policies for big donors make sense for charities? Click on the comments link just below this posting to share your thoughts.
