On the Record: Taking Out Life Insurance on Your Donors: A Gamble?

Among the many issues that must be considered by the charity — in addition to whether such an arrangement makes sense financially — are potential taxation questions concerning unrelated business-income tax (UBIT) issues and private-benefit rules.

A nonprofit organization that realizes income from a trade or business that is unrelated to its charitable purposes will be deemed to have UBIT and be subject to tax on that income at corporate tax rates.