Category: Charitable Donations

Year-end is a time for giving, not only to family and friends but also to charity. If you’re among our readers who are passionate about philanthropy, year-end giving can offer the satisfaction of making a difference as well as significant financial advantages.

THE IMPACT

Data from the Indiana University Lilly Family School of Philanthropy shows that charitable donations typically increase during the year-end giving season. This surge is partly driven by holiday spirit and the motivation to leverage tax advantages before the calendar year ends. Many people find that giving strategically can maximize their contributions while minimizing their taxable income. Charitable contributions have a profound impact, and exploring innovative options can elevate your giving strategy.

CONSIDER A GIFT OF LIFE INSURANCE

While traditional methods of donating, such as cash or grants, are well-known, using life insurance in charitable giving is an option that’s often overlooked. One of the most innovative ways to contribute is through life insurance policies. If you have a life insurance policy that you no longer need, or if you’re looking to give a substantial gift to a charity, you can transfer ownership of the policy to a nonprofit organization. This not only delivers a significant future benefit to the charity, but it also provides you with some notable tax advantages today.

When you make a charity the owner and the beneficiary of your life insurance policy, you may be able to deduct the policy’s cash surrender value on your federal income tax return for the year you gift the policy. Further, if you continue to pay the premiums on the policy, those payments can also be deductible as contributions to charity.

NON-TAX BENEFITS

By naming a charity as the beneficiary of your life insurance, you’re effectively building a legacy. This can be particularly appealing if you’re enthusiastic about a cause and want to ensure lasting support for it beyond your lifetime. Life insurance gifts also may be simpler and more flexible insurance than other asset transfers, such as real estate or stocks, which can involve complexities associated with valuation and appreciation. You don’t have to give away your entire policy. You can choose to gift a portion of the policy or maintain partial ownership while designating a charity as the beneficiary.

FINAL THOUGHTS

As you contemplate your year-end giving strategy, remember that the essence of giving lies not just in the act of donating but in how creatively and effectively you can align your philanthropy with your financial goals. Contact your trusted advisors as they can provide additional insights tailored to your financial situation, ensuring you are making the most of your generosity.

Keeping with the trends of the past decade, 34% of all giving in 2024 occurred in the last three months of the year.

^{Source: 2024 Trends in Giving, Blackbaud Institute, 2025}

QUESTION:

Do my volunteer hours at the local food pantry count as a charitable contribution?

ANSWER:

Unfortunately, your good deed won’t come with a tax break. Hours spent volunteering for a qualified charity aren’t a tax deduction. But there is some good news. The miles you drive to get to and from the food pantry are tax-deductible. For 2025, you can deduct 14 cents per mile if you itemize deductions. And if you make donations of food or other staple items to the pantry, those costs are deductible too.

Looking for a tax-efficient way to support your favorite charities while providing for your heirs? A charitable lead trust (CLT) may be a solution. With a CLT, you can make a meaningful impact on causes you support while potentially reducing your tax burden.

WHAT IS A CHARITABLE LEAD TRUST?

It’s a legal arrangement that allows you to transfer assets to a trust, which makes annual payments to the charity of your choice for a specified period. Once that period ends, the remaining trust assets can be passed on to your heirs or beneficiaries.

A charitable lead trust is an irrevocable trust that aims to reduce a beneficiary’s potential tax liability.

A UNIQUE OPPORTUNITY

A key advantage of a CLT is its ability to generate tax savings for you. Trust funding can offset some of your income, estate, and gift taxes. Additionally, any appreciation of the trust assets during the charitable period won’t be subject to estate or gift taxes when passed on to your heirs. This can effectively transfer wealth to future generations while supporting causes that matter to you now.

Creating a charitable lead trust is a complex financial decision that requires careful consideration and the advice of tax, legal and financial professionals.

Americans gave an estimated $557.16 billion to U.S. charities in 2023, according to Giving USA 2023: The Annual Report on Philanthropy for the Year 2023 (from the Giving USA Foundation, the Giving Institute, and the Indiana University Lilly Family School of Philanthropy). The total includes charitable contributions from individuals, estates, foundations, and corporations.

HOW TO CHOOSE

If you want to give to an organization that makes the most of your charitable giving, learn how much of each dollar goes toward the charity and how much is spent elsewhere. You can find some organizations with websites that evaluate the legitimacy of charities and how they spend contributions.

Also, look for a charity’s IRS Form 990 and ask to see its audited financial statement to ensure it meets your desired standards. Match your giving objectives with a charity’s mission and demonstrated results. Look for charities that best match your values.

GET HELP

If you make significant charitable contributions, consider enlisting the aid of your advisor and an estate planning attorney. Although the federal estate tax exclusion is higher than in the past, some families may exceed it while also dealing with lower state estate and inheritance tax thresholds. Structured properly, charitable giving can benefit your charity and reduce estate taxes.