The CHIRA® Plan At A Glance. 
Many individuals graciously donate their time, talent and treasure to the charities they love. One huge source of treasure for charities, however, has been ignored. A donor’s ability to obtain life insurance, referred to as their “insurable interest,” can be exceptionally valuable to the charity, today, and it can provide a source a charitable funds to replace at least the financial loss of these “front-row” donors who are so precious to long term viability of the charity.

Many donors, who otherwise may have no interest in insurance, may be willing to allow charity to purchase insurance on their lives if they did not have to pay for it. Many charities would be willing to purchase the policy with funds loaned to the charity from the donor’s IRA, especially if the death benefit was used to repay the principal. This guaranteed debt repayment can provide an immediate and substantial cash benefit to charity. This is called a “CHIRA®” plan and it can generate substantial capital for charity, today, right when you need it. It can be implemented in a prudent manner that preserves the long term viability of your charity. This new source of endowment can provide very real results, today. Approved by insurers and state departments of insurance, the time for legitimate “insurable interest” gifts has arrived.

For example, a 74 year old donor decides to loan $1 million from her IRA to her favorite charity. The charity uses $30,000 each year to purchase a $1 million life policy on her life. The death benefit is used to fully repay the loan. Today, the charity will have $970,000 to allocate to their charitable purposes as well as a prudent interest and premium reserve. Whether it is cash to sustain their budget for a few years, or to put shovels in the ground two years early, the CHIRA® plan provides immediate capital without income tax to the donor. 

We hear so much about federal bailouts for commercial enterprises, state governments and various entities. However, we hear very little about assisting charitable organizations. How will they obtain the cash flow that they need during these tough times? The CHIRA® plan can generate a huge source of capital for charity. After years of compliance, due diligence and review, the time for the CHIRA® plan is now. Can you afford to ignore this opportunity? 

What Is A CHIRA® ?
A CHIRA® is a planning opportunity that allows an individual to reinvest IRA funds into their favorite charity while insuring that the funds are returned to their family upon their death. This shift in wealth, from Wall Street to Main Street, can generate an immediate benefit to charity without income tax to the individual.

How does the insurance policy work?
The insurance is there to insure the repayment of your loan. It is not intended to be resold or owned by a third party. The charity owns the policy and pays the premium. You simply agree to participate in underwriting and sign the application naming the charity as beneficiary of the policy. Your IRA is a creditor of the policy and its death benefit to the extent of the outstanding balance of the loan at your death. The IRA cannot forgive the loan. Your IRA is repaid at your death and the IRA is paid to your named beneficiary. The named beneficiary of your IRA can be spouse, family or the charity. The life policy is a condition of the loan and protects your heirs. Your ability to obtain insurance is an asset. This precious asset can be used to help your charity now and to protect your heirs.

The policy on your life will be based on your age and health. The underwriting process involves a written application and requires access to your physician’s records, but does not necessarily require a physical examination. You may be able to participate even if you think you are “uninsurable.” Our approved insurers are highly rated companies. You should determine whether your current and/or future anticipated insurance needs are satisfied before proceeding.

How does the charity satisfy the interest?
The charity is obligated to pay annual interest. While not required, many charities will reserve a portion of the initial loan proceeds to satisfy interest payments. Many charities, as they do with other obligations, request the assistance of donors to satisfy their charitable needs. The interest payments made by the charity are directed to your IRA.

Does the CHIRA® trigger income taxation?
No. The loan is an investment. It is not a gift. It is an arm’s length, interest-only secured loan bearing fair market interest. The principal amount of the loan becomes due upon your date of death. Interest payments are made on an annual basis.

How does the CHIRA® plan work?
The CHIRA® involves a loan from an individual’s IRA to their charity. The loan to charity is collateralized by a life insurance policy purchased by the charity on your life. For example, your IRA loans $100,000 to charity. Charity uses $50,000 for a single premium purchase of an insurance policy on your life.

The death benefit of $100,000 from the policy is used to repay your IRA for the loan. The Charity will annually pay interest. A prudent charity may reserve $30,000 to service future interest (and any additional premiums if the policy does not perform as anticipated). After payment of policy premiums and the interest reserve, the charity will receive an immediate, unrestricted cash infusion of $20,000. This can be used by the charity for their tax exempt purpose.

Do you know how difficult it is for your charity to raise $20,000? This requires enormous planning and labor. The impact of this single transfer is often equivalent to several fundraisers, allowing you to make an immediate and meaningful contribution. The CHIRA® program can be tailored to increase the benefit to charity.

Do I get a charitable deduction for the loan?
With the loan, you have not made a gift to charity. You have invested in charity. The investment is a secured loan. The loan is fully repaid. There is no charitable deduction for the loan. While not required under the plan, individuals can independently pledge to assist their charity with cash donations. These donations are subject to the limitations otherwise set forth under the tax laws and may or may not be deductible depending upon your situation.

How long has the law supporting this plan been in existence and why haven’t I heard about it before?       
This plan is based on the Internal Revenue Code, Treasury Regulations, Revenue Rulings, Tax Court and Supreme Court opinions that have been in existence for over a decade. The CHIRA® program also relies upon a recently issued private letter ruling by the U.S. Department of Treasury stating that the transaction does not violate tax rules prohibiting certain transactions between plans and certain parties and rules prohibiting investments in insurance. Private letter rulings are addressed only to the parties requesting the ruling, and such rulings may not be used by others as binding precedent. Nevertheless, a private letter ruling may be cited by another taxpayer as “substantial authority” for a tax position.
 
Under the Pension Protection Act of 2006 (PPA), can’t I already transfer cash to charity from my IRA? How does CHIRA® differ?       
The PPA allows individuals, age 70½ or older, to transfer IRA cash to charity without any income tax or deduction. The funds transferred under PPA are forever lost to heirs. With CHIRA®, the funds are preserved for heirs. The PPA expired on December 31, 2007. Legislation is being considered to extend the PPA to December 31, 2008. Charities can incorporate PPA gifts with CHIRA® plans to satisfy interest
 
So, I don’t pay for any insurance premiums? What are the legal fees?       
The charity pays for the premium. Your IRA custodian will assist with the IRA rollover. The charity may pay legal fees related to the note issuance from the loan proceeds.

What are the basic steps involved in a CHIRA®?       
First, you and the charity initiate the underwriting process with an approved insurer and agent. Second, you initiate a tax-free rollover to an approved self-directed IRA custodian .Third, you direct your IRA custodian to transfer the funds to charity and charity signs a promissory note in favor of your IRA. Fourth, the charity purchases the insurance policy and assigns that portion of the death benefit equal to the outstanding loan to your IRA. Fifth, annual interest payments are made by the charity to your IRA. Sixth, upon your death, the insurance company repays your IRA for the outstanding loan balance and charity receives any excess.