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Abstract: 

The quick, and easy, answer to this article’s title question, with many planners today, would likely be “no.” Why would life insurance make any sense in a family foundation, which already has substantial tax benefits of its own? Although that answer has some reasonable rationale—asset growth in family foundations, by and large, occurs without taxation, one of two core tax advantages of life insurance—so why create redundancy? The short-answer response to that is: leverage—life insurance amplifies the assets placed in it; it’s a valuable diversification, liquidity, and asset allocation tool. The longer answer, however, is that there is more to the story—and that thinking about the use of life insurance and FFs should not be limited exclusively to the idea of the foundation owning the insurance on the primary donor(s).

Keywords:  Letter Ruling 200232036; Letter Ruling 200232036

Affiliations:  1: The Holleman Companies.