X-Message-Number: 20417
Date: Fri, 8 Nov 2002 10:39:44 EST
Subject: Gift annuities and cryonics funding,  Monograph from Rudi

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In a message dated 11/8/02 5:00:51 AM Eastern Standard Time, 

> I make an annual contribution to Memorial Sloan- Kittering Cancer Center.  
> By doing so, I have become aware of a means of making a donation called a 
> Gift Annuity.  The idea behind the gift annuity is to make a large lump sum 
> donation to which you retain the rights to a 7% to 12% return on the 
> donated money, until you die.  Upon your death, all of the money remains 
> with the organization to which your gift was made.
> I am curious as to whether or not cryonic suspensions could be funded in 
> such a way.  One of the main reasons that I have not signed up for cryonic 
> suspension yet is that I need the return on my savings for living expenses. 
>  Were it possible to pay for suspension in a way similar to the gift 
> annuity I would sign up tomorrow.  Any thoughts?
> Mark Buddle

Hello, Mark Buddle and fellow Cryoneters,

Mark has brought up an interesting point in estate and charitable planning, 
called a "charitable annuity".  

Here is how this works.  An individual donates a lump sum of money to a 
"tax-qualified" (IRS veted, legitimate) charitable institution.  The charity 
purchases an annuity which provides an annual income stream to the donator.  
In the past, with higher interest rates, this may have been the above 
mentioned 7 to 12 percent, but in the current interest rate environment the 
actual figure for income is probably under 5%.

BTW, for documentation on the above I have in front of me as I write these 
words the "Salvation Army Planned Giving Brochure:  A Financial Guide for 
Friends of the Army."  The SA is a tax qualified 501(c)3 charity, I happen to 
be on the Board of Advisers of the SA.  You can go their web site 
(salvationarmy.org) for further research and documentation.

The question above refers to a "Grantor Retained Annuity Trust".  Also known 
as a "charitable gift annuity."

The bottom line is that this will not work for cryonics funding.  For a 
number of reasons.  I wish it would, as I personally am involved in setting 
up annuities and gift annuities, and would be happy to set such programs up 
if they would work.  It would be advantageous for me to do because there is 
no underwriting on an annuity.  

There are places where these annuities are perfect.  But cryonics funding is 
not one of them.  Here at a minimum are some reasons that this form of 
financing is problematic:

1.  The Charitable Gift Annuity requires a lump sum to donated to a tax 
qualified charity, with an income stream of probably 2% of the amount 
annually going back to the donator.  But signing up for cryonic suspension is 
much more like contracting for a SERVICE.  It is a VALUE FOR VALUE 
transaction, which happens to occur at your "death".  This is not a "GIFT" to 
a charity.  Unless you want to donate a LARGE amount of money OVER your 
funding costs.  

If you want to take the time and money to get a PRIVATE LETTER RULING from 
the IRS as to what percentage of the money you give to ALCOR is a donation, 
and what percentage is a "fee for service," you may do so.  Having such a 
ruling would be the only way this would not be considered "abusive, flakey, 
and a red flag" for auditing.  And I can virtually promise you that you won't 
get great cooperation from the cryonics organizations or the IRS, because 
there are too many unknowns at this point, and the cryonics organizations 
will wisely not risk any accusation of tax fraud.

2.  While ALCOR is a tax-qualified 501(c)3 charity, (I have the IRS paperwork 
documention showing this), I don't believe the Cryonics Institute is.  And 
both organizations do not wish to run afoul of IRS as potentially "abusive 
tax shelters".  
Cryonics and what we are doing is controversial enough in it own right.  

We do not want or need, indeed we cannot tolerate, any "gray area" 
questionable tax shelter accusations.  

Several folks have asked me if they can deduct their life insurance premiums 
which are going to fund their ALCOR policy.  The answer is, unfortunately, 
"No" for the above two reasons.  

HOWEVER, Mark, the good news is this.  

The cost of funding cryonic suspension through life insurance is generally 
LESS than the cost of tying your money up through an outright GIFT to the 

Using a hundred thousand dollars as an example, and assuming that you could 
invest this in your business at 5%.  (Pretty conservative number.)

This means that you have FIVE thousand dollars a year from the above 100K.  
Dollars NOT flowing to you if you give the money away, or have it permanently 
committed to ALCOR or CI.

If you are a reasonably healthy nonsmoking 45 year old, you can fund a 
PERMANENT cash value building life insurance policy for $100,000 for less 
than ONE thousand a year!

And this amount will not come from your estate and the loved ones you care 
about when you are suspended! 

There is a reason why I have a number of clients who have net worths in the 
TENS of millions of dollars, who could afford to pay for their funding out of 
"petty cash" who WISELY fund their suspension with LIFE INSURANCE.  It is 
called FINANCIAL LEVERAGE, and this is what the "big boys" in business "DO".

Thanks for the chance to address the above issues.  

I will be touching on the above briefly in my speech at the ALCOR convention. 
 I am scheduled to speak on Sunday Morning.  Unfortunately, I was not told 
about the Thursday evening session until after I bought an unchangable 
ticket, so will not able to address insurance cryonics funding issues on 
Thursday evening.  But, the rest of the weekend I will be available if you 
can grab me to discuss any such issues.:)

Warm Regards to all, and to all good and solid cryonics funding!

Rudi Hoffman CFP


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