Charitable Giving
As a financial adviser, I am privileged to work with many wonderful people who give generously. These are people who want to leave a legacy – clients who want to leave money behind which will continue to accomplish the good works the donor did during his or her lifetime. You may see or hear the names of prominent donors – sponsors of a university building or underwriters of Masterpiece Theatre – and think: Well, yes; I’d love to endow this or that organization or charity, but I’m simply not in that league.
Leave a Legacy
Even if you don’t have a lot of spare cash kicking around, you may still be able to leave a legacy. One of the best ways to do this is with life insurance. For a manageable annual premium, you may be able to leave hundreds of thousands of dollars to your favorite organization. It works like this:
Step 1: Decide which non-profit you’d like to see flourish.
Typically, this is a 501(c)(3) organization such as a church or synagogue, an alma mater, a hospital, an arts organization, or a charity.
Step 2: Work with the development officer or planned giving department.
Make sure they are willing to accept your gift of life insurance. Typically, the charitable organization itself will apply for a policy on your life, and be the owner and the beneficiary of the policy. You, the donor, are of course the insured.
Step 3: Make tax-deductible gifts to the charitable organization.
That’s right – you don’t make premium payments to the insurance company. You make tax-deductible gifts to the charity, which in turn makes the premium payments. If there is a specific objective for the funds, or if you desire a certain department to receive the funds at your death, make sure to get this in writing. The receiving organization will most likely have a gift agreement for you to sign, which codifies your wishes.
An Example
My business partner, Jonathan Cameron, when just 31 years of age, made a $100,000 gift to the Honors College at Florida International University – his alma mater. He makes annual tax-deductible gifts to the Honors College of $1,500 for about fifteen years. The College owns the policy and is the beneficiary. The policy is structured in such a way that the death benefit will rise through the years. Assuming historical returns, the death benefit at his mortality age (about 90) should be about $1 million dollars!
Life insurance is an excellent way for younger people to give back. It’s a vehicle many start thinking about later in life. Yet, assuming good health, opening a policy in your early years is a cost-effective way to give substantially.
FIU credited Jon with a $100,000 gift. For the next year he was invited to all sorts of functions reserved for large donors, even though he was only out-of-pocket $1500.
You Can Probably Afford a Planned Gift
Don’t let money keep you from making a planned gift and establishing the legacy you’d like! Insurance policies can be issued, generally, for as little as $25,000. Work with the planned giving officer of the organization you’d like to support. Where there’s a will, there’s probably a way.
Important Tax Law Updates – 2026
The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, introduced significant changes to both charitable deductions and estate and gift taxes. These changes directly affect the tax planning context for planned giving strategies like the one described above. Here is what donors and their advisors need to know.
1. NEW BENEFIT for non-itemizers: Starting in 2026, taxpayers who take the standard deduction (which is now $16,100 for single filers and $32,200 for married couples filing jointly) can also deduct up to $1,000 in cash charitable gifts (single) or $2,000 (married filing jointly) as an above-the-line deduction. Previously, only the roughly 10% of taxpayers who itemized could deduct charitable contributions at all. This is a meaningful win for the vast majority of donors.
2. NEW FLOOR for itemizers: Starting in 2026, itemizers may only deduct charitable gifts that exceed 0.5% of their adjusted gross income (AGI). For example, if your AGI is $200,000, only the portion of your giving above $1,000 is deductible. Smaller, routine gifts may no longer yield a tax benefit for itemizers.
3. CAP for top-bracket donors: For taxpayers in the 37% marginal tax bracket, the tax benefit of itemized charitable deductions is capped at 35 cents per dollar – down from 37 cents. This is a modest but real reduction for the highest-income givers.
Estate & Gift Tax – Dramatically Higher Exemptions in 2026
The OBBBA permanently increased the federal estate, gift, and generation-skipping transfer (GST) tax exemption to $15 million per individual ($30 million for married couples) beginning January 1, 2026. There is no expiration date on the new $15 million level, and this amount will be indexed for inflation annually starting in 2027.
Note: The estate tax exemption applies to federal taxes only. Eighteen states and jurisdictions still impose their own estate or inheritance tax, often at lower exemption thresholds. Donors in those states should still plan carefully with a local estate planning attorney.
You Must Be Insurable
To do a planned gift using life insurance, you must be insurable, i.e. in reasonably good health for you age. If you had a heart attack or skin cancer removed recently, this strategy may not work. But – there are survivorship policies that insure two lives and pay out on only the second death. These can work even if one spouse is not insurable.
Alternatively, if you already own a policy that you no longer need, you can give that policy to the charity, and your deduction will be roughly equal to the cash surrender value of that policy.
Check out my companion piece on life insurance as a charitable giving option for more detail on how these policies are structured.
Quick Reference: Charitable Giving Tax Rules – April 2026
- Life insurance planned gift structure: Fully valid. Donor makes annual tax-deductible cash gifts to the charity; charity pays the life insurance premium and is the policy owner and beneficiary.
- 501(c)(3) requirement: Unchanged. The charitable organization must qualify under IRC §501(c)(3).
- Non-itemizer deduction (new in 2026): Up to $1,000 (single) / $2,000 (married) for cash gifts to qualifying charities, even if you take the standard deduction.
- Itemizer floor (new in 2026): Only the portion of annual cash gifts exceeding 0.5% of AGI is deductible.
- Top-bracket cap (new in 2026): 37% bracket taxpayers receive only 35 cents of deduction benefit per dollar of charitable gift.
- AGI limit on charitable deductions: 60% of AGI for cash gifts to public charities – unchanged and now made permanent by OBBBA.
- Estate tax exemption (2026): $15 million per individual / $30 million for married couples – permanent, inflation-indexed. No sunset.
- Annual gift tax exclusion (2026): $19,000 per recipient. Gifts to charity via the planned giving structure are separate from this limit.
- QCDs (IRA charitable distributions, age 70½+): Not subject to the new 0.5% AGI floor. A highly efficient giving vehicle for older donors.
- State estate taxes: 18 states and jurisdictions still impose their own estate/inheritance tax. Plan accordingly.
