Creating a Legacy Doesn’t Have to Come at a Cost

How can you achieve your philanthropic goals without compromising your financial stability?

If most of your assets are dedicated to retirement, preserving financial flexibility, tax planning, or caring for loved ones, making an impactful charitable donation may seem out of reach.

There are nearly as many reasons people have philanthropic desires as there are charitable organizations that depend on donations to fulfill their missions. When the motivation behind those desires is to create an impact that lasts for generations, charitable giving is often integrated into estate planning through tools such as charitable trusts and donor-advised funds (DAFs). But these strategies aren’t without cost.

Alternatives to Cash or Traditional Assets

Most estate plans include a life insurance component purchased for a variety of reasons that may change over time, diminishing the need for coverage. Some reasons a life insurance policy may no longer be needed are:

• It was purchased for family protection, and the beneficiaries are now self-sufficient
• If the permanent federal estate tax exemptions under the OBBBA (One Big Beautiful Bill Act) decreased your estate tax exposure
• If it is a corporate-owned or keyperson policy and the company is sold, or the executive is retiring

Would you purchase this policy today, given the same financial requirements?

If the policy is underperforming or you no longer wish to allocate cash resources toward the premiums, it may be time to explore the most advantageous exit strategy.

If you choose to donate an unneeded policy or name charity as the beneficiary, the donation is not realized until you pass away. There is an alternative way to optimize your existing policy to play a powerful role in your charitable giving goals.

A Strategy That Doesn’t Sacrifice Financial Wellness

Life insurance policies with a death benefit of $100,000 or more on insureds age 65 or older may have fair market value that far exceeds the cash surrender value. A life settlement is the sale of an existing life insurance policy for more than the cash value and less than the death benefit. In 2025, selling a policy generated, on average, 9x more than if the policy had been lapsed or surrendered. Creating liquidity from an asset you no longer need or want allows you to:

• Create a Lasting Legacy: Make a much larger contribution than you ever thought possible or use it to fund your preferred charitable vehicle (Charitable Trust, DAF or Private Foundation).
• Eliminate Premium Obligations: Once a policy is sold, the purchaser pays all future premium payments if they intend to keep the policy in force. You could reallocate those premium dollars toward a donation, a charitable vehicle, life-income gift or other planning needs.
• Flexibility: The funds from a life settlement can be used for anything. You can choose to contribute all of it to charity, or allocate a portion to support retirement, investment, estate or business planning needs.

Case Study: “I was able to see the outcome of my donation while still living.”

By monetizing a $3,000,000 Universal Life policy she no longer needed through a life settlement, Cecilia (age 85) was able to exceed her charitable giving goals even though her resources were tied up in other financial commitments. She received $1,100,000 (almost 23 times the cash surrender value of $48,000) and was honored at the charity’s annual gala for her significant contribution.

Things to Consider with a Life Settlement

1. It is a policy owner’s right to sell a life insurance asset in all 50 states. The life settlement market is highly regulated, and any reputable facilitator will only work with institutional buyers.
2. Representation matters. A licensed, independent life settlement broker represents the policy owner and helps market the policy to multiple potential buyers. Working with an experienced broker and your trusted advisors can help you better understand the process, evaluate offers, and determine whether a life settlement aligns with your financial and philanthropic goals.
3. Competitive bidding can help maximize value. Similar to selling real estate, obtaining offers from multiple qualified buyers may increase the policy's value. Ask whether the life settlement provider conducts a competitive auction process among institutional buyers.
4. Tax implications should be reviewed carefully. Proceeds from a life settlement may have federal, state or local tax consequences. The tax treatment depends on factors such as the policy's cost basis, cash surrender value and settlement amount received. Consult with your tax advisor before pursuing a life settlement strategy.

Your Legacy May Be Waiting in Your Financial Plan

Reviewing existing life insurance policies may uncover assets that no longer serve their original purpose. For some individuals, a life settlement can create liquidity that supports both charitable objectives and broader financial planning goals. As with any significant financial decision, consult with qualified legal, tax, and financial professionals to determine whether this approach is appropriate for your situation.

About the Author

Jon B. Mendelsohn
Co-Founder + Chief Executive Officer | Ashar Group

Since co-founding Ashar Group in 2003, Jon has been an influential member of the industry, serving as an advocate for best practices and transparency. Through tireless collaboration with members of the insurance and financial services, legal, and trust communities, he has developed unique and proprietary processes that save advisors valuable time and manage client expectations in a responsible manner.

Disclaimer: Consult a tax advisor to discuss the tax implications of selling a life insurance policy. An independent life settlement sell-side advisor can help determine the fair market value of your policy.

Ashar Group is a nationally licensed sell-side life settlement firm that protects policy owners’ best interests by facilitating a competitive policy auction to deliver the best value to sellers. Ashar Group does not sell life insurance, manage assets, or purchase policies. They are an independent resource for fiduciary advisors and their clients, specializing in life insurance valuation for planning purposes.