Funding Methods for
Cryopreservation at Alcor


The following five funding methods are currently accepted by Alcor for new applicants and for supplemental funding for existing members. Full pre-funding is required for Alcor membership, which includes Alcor’s best efforts at cryopreservation (cryonic suspension), long-term care, and recovery (see Costs: “Alcor Cryopreservation Agreement - Schedule A - Required Costs and Cryopreservation Fund Minimums”). Infrequently, under special circumstances, an additional alternative funding arrangement not shown here may be considered. To assure Alcor’s ability to provide proper care, necessary components of any funding method must include security, reliability and liquidity. To the extent possible, regardless of the funding method selected, the funding provided reverts back to the former member in the event of any membership cancellation. In addition to cryopreservation funding, members have modest annual dues or equivalent (Life Membership), and standby charges (Comprehensive Member Standby); see Costs, for details. The Alcor Foundation encourages those considering new membership to complete their arrangements expeditiously, by using the most-practical current funding method available which satisfies their individual circumstances. “Delay can be hazardous to one’s health!”

If you find any of following information confusing, please don’t hesitate to contact Alcor’s Membership Department Coordinator or Finance Director.

 

1. Life Insurance

Used by the vast majority of current Alcor members, this is the most typical funding arrangement because it is affordable on a day-to-day basis (see table below for illustrative costs). Alcor is designated as both the beneficiary and owner of the life insurance policy (revocable if membership terminated), although Alcor may accept co-ownership and/or collateral assignment on large policies. The death benefit must equal or exceed the amount required for cryopreservation. Periodic premiums are paid to the life insurance company (an independent business entity from the Alcor Foundation), thus enabling the cost to be spread over an extended period of time. Alcor makes a claim on the policy only after the legal death of the member. Only highly-rated insurance companies (rated “A-” or better by A.M. Best should be considered by the applicant.

Types of Life Insurance. Types of Life Insurance. There are four types of life insurance: Term Insurance, Whole Life Insurance, Universal Life Insurance, and Index Universal Life.

  • Index Universal Life is a permanent universal life policy that enables the cash value to grow at higher rates. The interest credited to the cash value each year is determined by the rate of change in one or more major stock market indexes, like the Standard & Poor’s 500 Index. The dollars are not invested directly in the index, but instead the change in the index over a year’s period defines the interest credited to the policy. There is usually a cap or maximum interest rate, for instance 12%, and floor or minimum interest rate of 0% or 1%. Even if the index is negative or minus for the year, your account does not lose money, but stays level. Because the account has most of the upside when the market index goes up, and does not go down when the market goes down, the long term average growth can be substantial, in the area of 6% or 8% a year. The cash value can go up in addition to the face amount of the life insurance policy, enabling the total life insurance proceeds to keep up with inflation if the policy is properly funded. Index Universal Policies are slightly higher than traditional Universal Life policies, but have the advantage of accumulating more cash value as well as an increasing death benefit in the later years.

  • Whole Life Insurance is insurance for the duration of a person’s life (no expiration date) and costs more than Term Insurance. It builds cash or equity over time, which is tax deferred and protected from creditors. In the case of a limited pay whole life or universal life policy, the policy can accumulate enough cash value to become "Paid up." This means no further premiums are due and the policy will remain in place until the face amount is paid out. In later years of life, when earning power may be lower, this can be helpful, as it keeps the policy in force without making payments.

  • Universal Life Insurance, also called Adjustable Life, can be thought of as an account in which money grows at current interest rates. Out of this fund, the insurance company deducts the cost of insurance. The cost for a Universal Life policy is typically midway between Term and Whole Life policies. Payments to a Universal Life policy can be increased or decreased within broad limits defined by the policy. It is possible to "Pay up" the policy with a single payment lump sum or pay the policy off over 7 years. Modern Universal Life policies sometimes have an underlying guaranteed rider which enables these policies to have the safety of Whole Life Insurance, along with better cash accumulation and greater flexibility of payments.

  • Term Insurance offers coverage for a “term” or period of time, such as 10 years or 20 years. During that term, the cost of insurance does not change. Term Insurance is a low-cost option and can often be converted to a Whole or Universal Life policy, which will cost more but will not terminate after a period of time. If using a Term policy, the applicant should ensure that it can be converted or renewed. Otherwise, changes in health status during the term can leave a person uninsurable. If the policy terminates before being converted, the Alcor membership will not continue unless a new policy is obtained.

Illustrative Monthly Premiums for Life Insurance. The table below provides some illustative rates for life insurance. All rates quoted August 2010 with an A-rated carrier, for a “preferred non-tobacco user.” The first example below is for a 30-year level term life insurance policy, upgradeable to whole/universal life insurance with no evidence of insurability. The remaining examples are for universal life with a “guarantee to age 120” rider providing that premiums will not increase and benefit amounts will not decrease until age 120. Quotes provided by insurance agent and Alcor member Rudi Hoffman.

Illustrative Monthly Premiums for Life Insurance
Applicant (August 2010)
Benefit Amounts
$150,000 $200,000 $250,000

29-year old female,
term life

$22/month $26 $27
29-year old female,
universal life
$55 $74 $92
34-year old male,
universal life
$67 $90 $112
62-year old male,
universal life
$243 $321 $405

For life insurance brokers / agents who have previous experience with Alcor’s requirements (no endorsements are given or implied, consistent with Alcor’s status as a non-profit Foundation), see Insurance Agents.

 

2. Prepaid - Cash or Equivalent

Funds may be transferred to Alcor in the form of check, money order, credit card, PayPal, Bitcoins, wire transfer, federally-insured certificates of deposit, marketable securities, other financial instruments, etc., or combinations thereof. After receiving payment, Alcor sets up a separate prepaid account in the received amount for the member at BMO Harris Bank, a federally insured bank. If prepayment is made in marketable securities, Alcor may liquidate the marketable securities upon receipt. Bitcoins will be liquidated immediately. For credit card payments, a 5% fee will be withdrawn to cover the cost related to the charge.

The funds are retained individually for the member within the government-insured, prepaid account until required for cryopreservation. Interest earned is retained in the prepaid account. Any interest retained that is eventually distributed to the member (if the member requests the prepaid account returned to them) will be a taxable event to the member and Alcor will issue a 1099 for the amount. The prepaid option is usually the fastest method of funding, and therefore often provides the shortest path to completing the membership sign-up process. Prepaid arrangements normally require the least time investment for the applicant and typically are the most appropriate for those under severe time constraints (as with a last-minute membership) or where the out-of-pocket funding cost is of relatively minor concern to the applicant. Depending on the applicant’s health and age, which affect the cost of insurance, prepaid funding may be the least expensive funding mechanism.

 

3. Trusts

All trusts involve some form of fees to the oversight trust company. Some applicants may perceive a potential advantage of trust funding, as it introduces third-party involvement in the trust company, which pays Alcor after the terms of your contract with Alcor have been satisfied.

  • Alcor Standard Trust: This legal instrument is the most widely used trust document among current Alcor members. The two-part document (the Funding Agreement and the Revocable Cryopreservation Trust) has been fully approved by Alcor legal counsel and the Alcor Board of Directors, and is therefore immediately available in its existing format and content. The Alcor Standard Trust is designed to be entirely autonomous from a member’s estate, to provide secure Alcor membership funding. Nevertheless, it is recommended that this Standard Trust be appropriately considered when arranging one’s complete estate financial plan.

  • Special Trusts: Pre-existing and individually tailored trusts, as well as adaptations of the Alcor Standard Trust, can be accommodated to fund new memberships. To assure the member’s proper cryopreservation, long-term care and restoration, and the security of current members and the Alcor Foundation, special trusts must be reviewed and approved by Alcor legal counsel, at applicant’s expense; the cost varies with the document’s complexity and counsel’s time. Special trusts require specific approval by the Alcor Board of Directors. Although more complex than some other funding options, a number of members have found special trusts to best meet their particular needs.


4. Annuity

An annuity is “a savings plan with a life-insurance company”. As with prepaid funding, a lump sum is paid up-front, equivalent to at least the amount necessary to qualify for the applicant’s Alcor membership. But the payment is to a life-insurance company entirely separate from Alcor, to establish the annuity. Amounts above the minimum funding may be added to the annuity at any time. An annuity can provide the same level of certainty of funds being available to Alcor as a life insurance policy, without the restrictions of obtaining life insurance (age, driving record, health, etc.) and may provide a higher rate of interest return than other forms of funding.

Alcor Requirements for Annuities:

  • A mechanism must exist to allow Alcor to continually monitor on-line the availability of the accounts earmarked for cryonics funding.
  • In the event of the annuitant’s death, all back end fees and surrender penalties must be waived.
  • Alcor must be the irrevocable beneficiary.
  • Only guaranteed, fixed annuities are accepted.
  • At least the minimum funding level must be maintained.
  • The insurance company must be rated “A-” or better by A.M. Best.

The only type acceptable to Alcor is a fixed annuity. In this plan, the life insurance company provides a guarantee that the principal (the initial lump sum) and the interest (the growth on the account) remain available for payment to the beneficiary. Some fixed annuities declare a specified rate for a given time period, similar in concept to a bank certificate of deposit (CD). One year, five year, and ten year periods are available, all with guaranteed interest rates. After the end of the period, a new rate is established by the insurer.

A more recent fixed annuity is the guaranteed index annuity. This is a type of fixed annuity that has the following features:

  • The principal (the original lump sum) is guaranteed. In most cases and states, this is guaranteed by both the highly-rated insurance company and the state government (in the unlikely event of insurance-company failure).
  • The growth on the money is determined by the change in a stock market index, such as the Standard and Poor’s 500 index. A floor is set so that a declining index does not decrease the annuity’s value.
  • Growth in these annuities accumulates tax-free until withdrawal, allowing compounding of interest that might otherwise be reduced by taxation.
  • Upon pronouncement of the owner’s “death,” the annuity proceeds pass directly to the specified beneficiary. With a properly-designated beneficiary, there is no delay or reduction of assets which otherwise could be caused by a probate process.

The annuity owner can remain the individual who is doing the funding. Also, while not technically required, it is recommended that the life insurance company issuing the policy be apprised of the annuity’s purpose.

Annuities meeting Alcor criteria require no additional legal or Board review. Modified and individualized annuities may be used, and are treated similarly to special trusts, requiring specific legal review at applicant’s expense, and Alcor Board of Director approval.

5. Alternative Partial Funding Methods

Alcor has previously accepted only secure funding strategies with assured rapid liquidity. We recognize that a significant number of members, especially members who are older and/or unwell with substantial assets but limited income, may find it difficult or impossible to secure increased life insurance. As of September 2014, Alcor is therefore allowing members to make limited use of less secure funding strategies.

On an individual basis, Alcor will accept partial payment for cryopreservation from alternative funding methods such as real estate, other physical assets, 401(k) plans, and bequests at a 50% discount from net assets in order to allow for risk. These alternative payment methods may be used only up to a maximum of 50% of current cryopreservation minimums. For instance, suppose you want to have $220,000 of funding to cover whole body cryopreservation with the CMS waiver, but have life insurance of only $120,000. You would need alternative funding of $200,000 (discounted by 50%) to make up the difference.

Acceptance of alternative funding methods in any individual case is subject to review by Alcor and will be approved, if at all, only after checking for possible conflicting claims, after attempting to verify the current value of assets, and while putting in place regular checks on future value. The 50% discount will be reevaluated over time as Alcor gains experience with alternative funding methods and ways to mitigate resulting risks. Any costs incurred to verify the value of these assets will be the responsibility of the member.

Certain types of group life-insurance policies (as furnished through a member’s employer, etc.) may be suitable if the policy can be owned by Alcor or assigned to Alcor. Many assets that are not suitable as-is may be converted by the applicant to another form that is suitable for funding purposes (i.e. the sale of real estate, mutual funds, etc.). For your special situation, discuss details with the Alcor Membership Department Coordinator.

 

Additional Funding Considerations

Supplemental Funding:

Additional funding (beyond the minimum membership requirements) is accepted and encouraged by the Alcor Foundation. Pre-arranged enhanced funding is strongly recommended for covering air-ambulance costs from cryotransport locations originating away from the Scottsdale / Phoenix area, to strengthen standby services, to aid a member’s unexpected legal defense, and to address unanticipated problems. Any unused funds are allocated per the member’s instructions in his/her contract with the Alcor Foundation. Additionally, a significant number of members have provided extra generic funding to aid and strengthen the Foundation, on the premise that a stronger organization is likely to provide a stronger bridge to their future. Supplemental funding can be achieved by extending the funding amount within any of the above funding methods beyond membership minimums.

Country of Residence:

Alcor encourages membership from all countries. Although the vast majority of Alcor’s members are from the United States and Canada, Alcor currently has members in more than ten different countries, including Australia and within Europe and Asia. The treatment of certain financial instruments may be affected by the residence of an applicant. For your specific situation, discuss details with the Alcor Membership Coordinator.

For quite some time Alcor has accepted life insurance policies naming Alcor as the owner and beneficiary. Since insurance companies in countries outside the United States often are not willing to name a US organization as the policy owner, the Alcor Board of Directors on December 2, 2006, approved a life insurance funding option for residents of the United Kingdom and other countries outside the United States, with the following stipulations:

  • Alcor is named the beneficiary.
  • There should either be no collateral assignees, or Alcor must be named as the assignee.
  • The policy is placed in absolute trust.
  • A minimum of one Alcor representative is named as a Trustee.
  • The Death Benefit (or Sum Assured) is permanently maintained equal to or in excess of the Cryopreservation Minimum, in equivalent United States Dollars.
  • Alcor is to be notified if policy lapses.
  • Premium is paid current.
  • Alcor requires a copy of the policy, Policy Schedule, stamped Trust Request Form (must be Absolute Trust), and stamped Deed (naming Alcor as an additional Trustee).