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Law Educator, Esq.
Law Educator, Esq., Attorney
Category: Estate Law
Satisfied Customers: 117401
Experience:  Experienced in Trust and Succession Law, including Louisiana Laws
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May the directors of a Not organization designate portions

Customer Question

May the directors of a Not for Profit organization designate portions of the accumulated cash values of life insurance policies in each of their where the organization is the owner and beneficiary? In 1990 I, along with my 8 siblings formed a not for profit organization with the nine of us as the Board of Directors and our mother as President Emeritus. At that time we purchased a $50K life insurance policy for our mother along with individual 10K policies for each of us where the organization is named as beneficiary at the time we made the purchase, we then changed the ownership from our individual names to the name of the organization and to date we p ay dues to the organization to cover the premiums. My mother died in 1995,one of my sisters died in 2010 and the Fund received over $60K. Several years ago, we decided to set aside $15,000 of the cash value of the existing policies to be used at our discretion for purposes outside the scope of the organization's tax exempt status.
Submitted: 2 years ago.
Category: Estate Law
Expert:  Law Educator, Esq. replied 2 years ago.
Thank you for your question. I look forward to working with you to provide you the information you are seking for educational purposes only.
Board members or directors of a non-profit cannot profit personally from the non-profit, that is a violation of the non-profit laws. This includes loans to board members. The non-profit can purchase life insurance for the benefit of the non-profit, but the board members cannot receive any personal benefit from the non-profit. As long as you are not receiving any further personal benefit now you are okay if the loan was years ago and has been repaid as that is not likely going to cause any harm now.