Brand Shank ChFC

Chartered Financial Consultant



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Helping You Make Informed Decisions

Charitable Giving


Charitable Giving as a Tax Strategy


To the extent that you can combine available tax advantages with your financial and charitable goals, charitable giving as a tax strategy makes a lot of sense. When evaluating the availability of a tax deduction for charitable gifts, it is important to be clear about what type of tax deduction you are considering: gift, estate or income tax. For donations to qualify for a tax deduction, they must be made to a qualified charitable organization, or specifically, a 501(c)(3) organization. Generally, qualified charitable organizations include religious, scientific, literary, educational, governmental and veterans organizations.


Estate-Tax Deduction


An estate would be entitled to an estate-tax deduction for any bequest given to a charitable organization. The federal estate-tax savings that can be derived from an estate gift can be impressive. Charitable contributions made by will are fully deductible for estate tax purposes provided the property given is included in the taxpayer estate.


Charitable Giving Options


If you are interested in making a gift to a charitable organization, then you must decide which of the available options will work best for you. Are you willing to part with the asset completely? Do you require an income stream in return for your gift? Do you prefer one large up-front tax deduction, or would you prefer to spread the deduction out over several years? Your options will also be guided by the type of asset involved. Do you plan to give cash, investments, real estate or personal property?


Outright Gifts


Charitable organizations always welcome an outright, no-strings-attached gift. An outright gift of cash offers simplicity and is typically the norm for small gifts. If you are considering making a significant cash gift by writing a check, you should stop and consider other assets that you may own that might make for a better gift. An outright gift of appreciated marketable securities offers the dual savings of the tax deduction and the capital gains tax avoidance, thereby reducing your net cost of the gift.


Gift of a Life Insurance Policy


The gift of a life insurance policy provides the opportunity to do far more for your favorite charity than you might think possible. When making a gift of life insurance, you could choose to give an existing policy or to purchase a new policy specifically for this purpose. Either way, the benefits of using life insurance as an integral part of your charitable giving program are enormous.


Existing Policy


After careful review of your circumstances, you might find that you have a life insurance policy that you no longer need for its original purpose. Perhaps you bought a policy years ago to cover a home mortgage that has since been paid off. Perhaps you left a business in which you were a key person and took with you a policy that was originally purchased to cover a business need. In any event, your changing circumstances may have freed up a policy you can give away. Under these circumstances, you might consider giving a paid-up life insurance policy instead of cash or other assets you may own.


New Policy


Most uses of life insurance as part of a charitable giving program involve newly purchased policies. These policies are purchased to create additional new values for the benefit of your charity.


How Does a New Policy Work?


Using a life insurance program to benefit a particular organization starts with applying for a policy on your life. Once the policy is in effect, you can turn it over to your chosen charity. You make annual contributions to your charitable organization, which entitles you to an income tax deduction. Your charity then uses your contributions to pay the life insurance premiums each year.


The policy builds cash value over the years, which is available to the organization. Upon your death, the policy proceeds are paid to your charitable organization. In making such a gift, you experience the joy of knowing that you have made a gift that will outlive you and that continues to support your chosen organization.



Benefits of Charitable Giving Through Life Insurance




  • can make a substantial gift to the charity of your choice through tax-deductible annual contributions.
  • will receive the satisfaction and recognition for major contributions during your life.
  • can create a significant new asset for your charitable institution that does not deprive your family of any major assets.
  • can be both an annual giver and an endowment creator.


Your Charitable Organization...
  • will receive gifts that help to build long-term endowment goals.
  • will receive the policy proceeds promptly, free from taxes and estate costs.
  • can control the program because it is both the policyowner and beneficiary.
  • has cash value available that grows over time within the insurance policy.



Note: Any dicussion of taxes herein or related to this website is for general information purposes only and does not purport to be complete or cover every situation. Tax law is subject to interpretation and legislative change. Tax results and the appropriateness of any product for any specific taxpayer may vary depending on the facts and circumstances. As provided for in government regulations, any statements related to federal taxes that might be contained in this website are not intended or written to be used, and cannot be used, for the purpose of evading taxes or avoiding penalties under the Internal Revenue Code. You should consult with and rely on your own independent legal and tax advisors regarding your particular set of facts and circumstances. We do not provide legal, accounting or tax advice.