Charitable Giving: From Values to Vision

Provided By: Ryan J Brems, Northwestern Mutual


When charitable requests come in the mail, making a pitch for your support, do you read the letters? Toss them into the recycle bin? Or do you give as much as you can?

According to Giving USA 2008, Americans donated a record $306 billion to nonprofit organizations in 2007. Still, reports suggest that those donations won’t keep up with the rising cost of providing much-needed charitable services both here and abroad.

The good news is, you don’t have to be wealthy to make a difference. Having a strategy for giving can help you make the kind of contributions that are most meaningful to you, especially when it integrates your charitable, family and financial goals into one strategy.


Make an outright bequest

One of the easiest ways to make a planned gift is through an outright bequest in your will or trust. By leaving money to charity when you die, the funds can go directly to the charity with no strings attached. What’s more, the full amount of your contribution is deducted from your estate.


Use your IRA for good

If you have an Individual Retirement Account (IRA), you can name a charity as a beneficiary. This allows you to continue to take withdrawals from your account during your life and then leave the remaining value to charity. The full value of your gift will be deductible from your estate upon your death.

Congress recently changed the rules for charitable gifts to include gifts made directly from IRAs. According to the new rule, if you are over 70 ½, you can give up to $100,000 each year from your IRA directly to charity without claiming any increased income or paying additional tax.  However, you are not permitted to take a charitable income tax deduction for the gift.


Giving through life insurance

Life insurance can be an easy and flexible way to make a significant gift to a favorite charity at the same time it offers practical advantages, including possible tax deductions.

Perhaps you have a policy you no longer need. You can give that policy to your favorite charity now and receive an income tax deduction for the fair market value of the policy or its basis, whichever is lower, and for any future premiums you continue to give to the charity. Alternatively, you could name a favorite charity as the beneficiary of all or part of your policy. This strategy allows you to access the cash value of your policy and retain control of the policy during your lifetime. In exchange, your estate will receive an estate tax charitable deduction for the benefit paid to the charity upon your death.

Another option is to give the cash dividends from your insurance policy to charity. This enables you to benefit a favorite cause while receiving an income tax deduction. (With life insurance policies that are not modified endowment contracts, you can receive dividends in cash up to the basis income tax-free.)

And finally, you can purchase a life insurance policy to fund a pledge or future donation to charity. Instead of making a large contribution now, this enables you to make smaller monthly premium payments over time. These premiums will result in a much larger financial gift when the policy matures and, in many cases, those premiums will be tax deductible.


Put your gift in trust

A charitable remainder trust is an example of an estate planning tool that may benefit not just your favorite charity, but you and your loved ones as well.

A charitable remainder trust allows you to transfer assets into an individually structured trust that provides you and/or your beneficiaries with annual payments for life or a term of years. After that, the remaining assets will be turned over to the charity of your choice.

The trust can be funded with a wide variety of assets, including securities, real estate or many types of business interests. Since the trust is tax exempt, any appreciated assets you transfer to the trust can be sold without any current capital gains tax.

By establishing the trust, you forever give up the assets you donate to the trust. As a result, your heirs will not inherit the assets placed in the trust. One way to compensate is to purchase a life insurance policy with some of the amounts paid by the trust.


Bringing more to giving

Like many people today, you may want to make a charitable gift but need to do so in a way that helps meet your other personal, family or financial needs. A knowledgeable financial representative can help you determine which giving vehicles are appropriate for your philanthropic goals and guide you through the transfer strategies and tax consequences. Working in conjunction with your legal and/or tax advisor, he or she can offer solutions to meet your particular needs.


Article prepared by Northwestern Mutual with the cooperation of Ryan J Brems.  Ryan J Brems is a Financial Representative with Northwestern Mutual the marketing name for The Northwestern Mutual Life Insurance Company (NM), Milwaukee, Wisconsin, and its subsidiaries.  Ryan J Brems is an agent of NM based in Hiawatha, IA.  To contact Ryan J Brems, please call (319) 533-1699 , e-mail at or visit  This information is not intended as legal or tax advice.


Note: This information is not intended as legal or tax advice. For legal or tax advice, please consult your advisors. Any figures cited in examples are for hypothetical purposes only and are subject to change. This information has been submitted by the author and has not been reviewed for accuracy by United Way of East Central Iowa.

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