Published Date, 2024

Exploring Planned Giving: The Rise Of Life Insurance As A Charitable Tool

Created By: Steve Orr and Lindsy Hannan
September 27, 2024

In recent years, the landscape of planned giving has evolved significantly in the United States, demonstrating remarkable growth and adaptation. Recent statistics show planned giving commitments rose by 2.3% from 2021 to 2022, reaching a staggering $46 billion. Furthermore, donor-advised funds (DAFs) saw a remarkable 9% increase in giving, with over $85 billion deposited in 2022 alone. As we look to the future, it’s essential to understand the key factors driving this growth and the unique opportunities that life insurance presents as a planned giving vehicle for donors and nonprofits.

Recent Growth Trends in Planned Giving

Estimates suggest that upwards of $84 trillion will be passed from Baby Boomers to younger generations over the next several decades. This wealth is being transferred through inheritance, estate planning, and charitable donations in the form of planned gifts. In conjunction with the Great Wealth Transfer, the recent uptick in planned giving has largely been driven by tax incentives, financial engineering, and technology. 

Key Factors Influencing Growth in Planned Giving

1. Tax Incentives

    Planned giving allows donors to contribute to causes they care about while simultaneously receiving notable tax benefits and gaining financially. Many individuals seek to reduce the taxable value of their estates through charitable bequests, which are deductible from estate taxes. By making large donations to charities, donors can reduce their taxable estate below the exemption level, thus avoiding or minimizing estate tax liabilities.

    Additionally, gifts to qualified charitable organizations may not only reduce the size of the taxable estate but can also provide lifetime income tax deductions. Tools such as Charitable Remainder Trusts (CRTs) or Charitable Lead Trusts (CLTs) allow individuals to contribute to charities while still retaining income benefits or wealth transfer options.

    2. Financial Engineering

    Financial engineering has played a transformative role in creating innovative charitable giving solutions within the insurance, banking, and finance industries. By using sophisticated financial instruments, modeling, and risk management techniques, these industries can offer products and strategies that encourage charitable giving while maximizing both tax efficiency and financial return.

    The growth of DAFs as a banking solution for charitable giving is particularly noteworthy. These funds allow donors to make a charitable contribution, receive an immediate tax deduction, and then decide later how to distribute funds. The appeal of DAFs is their flexibility and the potential for strategic philanthropy. As the younger demographic becomes more financially savvy and socially conscious, the interest in these giving mechanisms continues to grow.

    In addition, charitable life insurance and premium-financed charitable life insurance are two notable insurance products for charitable giving. Individuals use life insurance policies to benefit charities. In a common arrangement, the policyholder names a charity as the beneficiary, and the charity receives the policy’s death benefit upon the policyholder’s death. Financial engineers can structure these policies to provide significant tax benefits while maximizing the charitable gift.

    3. Technology and Accessibility

    Advancements in technology have played a crucial role in the growth of planned giving. Donors now have unprecedented access to information about various giving strategies. Online platforms and tools enable donors to calculate potential tax benefits and understand the long-term impact of their contributions. Additionally, banks and financial institutions can use blockchain technology to create transparent, traceable charitable giving platforms while financial engineers can design smart contracts that automatically disburse funds to charities when certain conditions are met, reducing administrative costs and fraud risks. Lastly, financial institutions can develop robo-advisors for charitable giving, using algorithms to recommend the most tax-efficient and impactful ways for individuals to donate based on their financial goals and values.

    The Rise of Life Insurance as a Planned Giving Tool

    Life insurance is gaining recognition as a powerful tool for planned giving. It allows donors to make significant contributions without impacting their current financial situation. By naming a charity as a beneficiary, donors can leverage their life insurance policy to make a more substantial gift than they might be able to afford during their lifetime.

    Spotlight: Premium Financed Life Insurance

    One of the most intriguing options within the realm of life insurance for planned giving is premium-financed life insurance. This strategy allows high-net-worth donors, $5M-$10M+, to maximize their philanthropic impact without depleting their cash reserves. An ideal candidate for this type of giving often has a need for liquidity, a strong credit profile, a requisite for a large death benefit, a long-term investment outlook, comfort with leverage, and a diversified investment portfolio.

    How It Works

    With premium-financed life insurance, donors can take out a loan to pay the premiums on a life insurance policy. This can be particularly advantageous in today’s declining interest rate environment, where borrowing costs are lower, making it easier for donors to sustain their policies without tying up substantial cash. Lower interest rates also lead to arbitrage opportunities for policyholders in the form of cash value growth. With interest rates on loans declining but returns on the cash value of the policy remaining stable or relatively higher, the policyholder effectively earns a return on the life insurance policy greater than the cost of borrowing.

    Benefits

    1. Increased Giving Capacity: Donors can fund larger policies, leading to a more significant impact on their chosen charities.
    2. Liquidity Preservation: Since the premiums are financed rather than paid out of pocket, donors retain their liquidity for other investments or needs.
    3. Tax Advantages: Death benefits from life insurance are generally tax-free, allowing the entire amount to go directly to the designated charity.

    Considerations

    While there are substantial benefits, it is also important to consider the potential downsides. In a low-interest environment, cash value growth may slow down, which can increase the risk of policy lapse if the borrowed amounts exceed the cash value. It’s crucial for donors to work closely with their financial advisor to ensure that their insurance policy remains properly funded and to fully understand the risks and rewards of this strategy.

    Conclusions

    As planned giving continues to grow, particularly with innovative vehicles like life insurance, it presents an exciting opportunity for both charities and donors. The current financial landscape, marked by declining interest rates, creates an opportune moment for organizations to educate their donors about the benefits of utilizing life insurance for charitable giving.

    By understanding the trends, embracing technology, and recognizing the needs of younger donors, organizations can effectively communicate the value of planned giving strategies. Life insurance, particularly when paired with premium financing, stands out as a powerful tool for those looking to leave a lasting legacy while supporting the causes they are passionate about.

    For organizations looking to tap into this growing trend, now is the time to engage in meaningful conversations with potential donors about how life insurance can amplify their philanthropic impact. The future of planned giving is bright, and with the right strategies, both charities and donors can achieve remarkable outcomes.

    Wherever you are in your planned giving journey, Orr Group has the expertise to support you in planned giving strategy, management, and administration. Get in touch to learn more. 

    Contact Us
    Steve Orr headshot

    Steve Orr is the Co-Founder and Managing Partner of Orr Group. Steve draws from his investment banking and finance background to bring a problem-solving approach, a focus on metrics, and an outcomes-driven perspective to the nonprofit sector.

    Lindsy Hannan is a Director at Orr Group. She brings over ten years of fundraising experience with a strong focus on corporate giving, donor relations, pipeline development, event fundraising, and board management.

    Related Resources

    Planned Gifts: A Blueprint For Nonprofit Fundraising Success
    Published Date 2025
    Planned Gifts: A Blueprint For Nonprofit Fundraising Success

    Created By: Steve Orr Updated May 7, 2025 Planned giving is a fundraising opportunity worth trillions that nonprofit teams can—and should—leverage. The Great Wealth Transfer (the mass transfer of $124 trillion from baby boomers to younger generations through 2048) represents more than a financial shift; it’s a critical opportunity for nonprofit organizations to harness the power of planned giving. In fact, experts expect $18 trillion to be donated directly to nonprofits.  By integrating planned giving into their fundraising strategies, organizations can take advantage of this massive opportunity, ensuring long-term sustainability and transformative impact.  In the current philanthropic climate, the question is not whether to incorporate planned giving but how to do so effectively. In this guide, we’ll define how planned giving works and explore essential best practices so your organization can cultivate a thoughtful, strategic, and lucrative planned giving approach. What is planned giving? Types of Planned Gifts Preparing Your Team for Planned Giving More Best Practices for Collecting Planned Gifts What is planned giving? Planned giving is when donors set money or assets aside to be donated to charitable causes in the future, either after a set amount of time or after they pass away. The Benefits of Integrating Planned Giving into Your Fundraising Program Unlike fundraising strategies that prioritize immediate returns, planned giving plays a critical role in building long-term sustainability. These future-focused gifts can unlock powerful, lasting benefits for nonprofits, including: Long-term financial stability. Planned giving creates a reliable, future-focused revenue stream that helps nonprofits weather uncertainty and plan confidently for what’s ahead. Increased donor engagement. Making a legacy commitment is a deeply personal and thoughtful act. It can strengthen a donor’s connection to your mission and increase their sense of loyalty as they shape the impact they’ll leave behind. Identify new prospects. Planned giving can attract donors with non-liquid assets, opening up a new pool of prospects. It also creates opportunities to deepen relationships with current and future supporters. Some gift types offer tax advantages, like capital gains exemptions, making participation more appealing for donors and beneficial for your organization. Support for large projects or endowments. Like capital campaigns, planned gifts are often larger than everyday contributions (studies show that a planned gift is 200 to 300 times the size of a donor’s largest annual gift), making them ideal for supporting large projects.  Stewardship opportunities past the donor’s lifetime. Even once a donor passes away, a planned giving commitment allows your nonprofit to convey the donor’s impact to their loved ones, and you could potentially earn new supporters in the process. Planned giving is a powerful way for donors to help advance your mission for years to come. To harness the transformative potential of planned gifts, your organization must educate your donors about leveraging this opportunity and support them through the process (more on that later). Types of Planned Gifts While planned giving is far more nuanced in practice, below are some common  types of planned gifts you might receive: Type of Planned GiftDescriptionDonor BenefitsTimelineExampleBequestsGift made through the donor’s will or trust after their passing.Estate tax deduction, more control over assets during life Deferred (after donor’s passing)Donor specifies 10% of their estate will be donated after their passingGifts of life insuranceGift made when a donor’s life insurance policy is paid out.Premium payments are tax-deductible.Deferred Donor names a nonprofit as a beneficiary that receives 10% of the policy payout upon their passingRetained life estatesDonor transfers property to a nonprofit but retains the right to live there until their passing.Charitable donation benefits while still retaining a residenceDeferred While the donor is still alive, they add the nonprofit to the deed so the nonprofit gets ownership rights when they pass. Charitable gift annuities (CGA)Donor contributes to a nonprofit in exchange for a fixed income payment for life.Donors can reduce income taxes and avoid capital gains taxes.Lifetime of the donorDonor contributes $60,000 for an annuity of $500 per year for the rest of their lifeCharitable remainder trusts (CRT)Donor contributes appreciated assets in a trust in exchange for a fixed income payment based on the original contribution’s value, and the nonprofit gets the remainder.Donors can reduce income taxes and avoid capital gains taxes.Lifetime of the donor or other specified termDonor donates $60,000 to a CRT with an annual income payment of $3,000 (5%) per year. The nonprofit keeps the leftover money from the trust upon the donor’s passing.Charitable lead trust (CLT)Opposite of a CRT; donor funds a trust that provides income to a charity for a set period. After said period, the remaining assets go back to the donor’s heirs.Potential estate tax savings on top of tax-deductible donationIncome to charity for a set period during the donor’s lifetime Donor contributes $60,000 to a CLT, which provides the nonprofit with $3,000 (5%) per year for 10 years. After 10 years, the remaining amount in the trust goes back to the donor’s heirs. Gifts of securitiesDonor contributes appreciated assets (like stocks or bonds) to a nonprofit.Donor avoids capital gains taxes and receives a charitable tax deductionImmediate transfer and the nonprofit sells the assetsDonor contributes $60,000 in appreciated stock to a nonprofit, avoiding paying taxes on the appreciated revenue.Pooled income fundsDonors contribute to a communal fund, receiving income based on the value of the original gift for life. Donor receives income for life, a charitable tax deduction, and can be part of a greater impact.Lifetime of the donorDonor contributes $10,000 to a pooled fund worth $200,000. They receive 5% of the total income paid out. Preparing Your Team for Planned Giving Planned giving is a complex strategic endeavor, representing a donor’s lifetime of financial planning and charitable intent. Therefore, a proactive and structured approach is crucial to meet donors where they are and anticipate future impacts. Yet even with the best intentions, many organizations struggle to fully prepare for the intricacies of planned giving. Success requires more than a plan on paper—it demands organizational alignment, internal readiness, and a shared commitment to integrating planned giving into daily practices. The following steps can help you lay the groundwork for a sustainable and successful program.: 1. Collaborate with the Executive Team To fully align your strategy across teams, your leadership team must be heavily involved with the process from day one. This includes your Chief Development Officer, Chief Operational Officer, Chief Financial Officer, and investment committee. These leaders ensure that the strategies you develop are sustainable, compliant with financial regulations, and properly positioned with your organization’s long-term goals. Moreover, their financial and operational expertise is essential for crafting gift acceptance policies, managing gifts, safeguarding organizational interests, and ensuring ethical stewardship of donor intent. Further, effective executive collaboration allows for clear communication of financial needs to donors, fosters a culture of collaboration, ensures successful service and program delivery, and establishes metrics and processes to set realistic goals and maintain accountability.  To collaborate effectively with the executive team, you’ll need to: Set regular meetings with them to provide updates on your program and review new opportunities in the planned giving space. Establish messaging guidelines to instruct executives on how to discuss and promote planned giving opportunities with donors. Create a clear action plan so executives understand their role in your planned giving process. Regardless of your nonprofit’s scope or available resources, the end goal of this step should be to secure buy-in from the most important decision-makers on your team. Provide a clear value proposition and answer any questions to steer your team in the right direction. 2. Build Your Planned Giving Program Framework Now that you’ve involved your executives in your planned giving strategy, it's time to define the fine print of your planned giving program. To be truly prepared for planned giving success, ensure your framework outlines the following elements: Program structure. Defining your program’s structure helps get it up and running by determining resource allocation, project goals, types of planned gifts you’ll focus on collecting, donor engagement strategies, and responsibilities of key team members.   Policies for planned gift acceptance. Decide which types of gifts you’ll accept, how the gifts are valued, and which restrictions or conditions are attached. Ensure these policies align with ethical standards and your nonprofit’s mission.  Necessary management infrastructure. Analyze your current capacity and resources to understand if you’ll need additional support (such as more staff members or a new team structure) to manage the program. Strategic partners. To facilitate your planned giving program, your nonprofit might work with financial advisors, planned giving experts, general fundraising consultants, attorneys, and more. Start building a network of partners to help your efforts go off without a hitch.  “When considering premium financed life insurance structures, it’s crucial for organizations to fully understand the complexities and opportunities these vehicles offer. Our legal expertise ensures nonprofits are well-prepared to navigate these sophisticated planned giving strategies.”Alex Burgess, VP & Principal, The Burgess Group As you develop these fundamental policies, collect input from executives across the team to gain various perspectives and keep everyone in the loop.  3. Educate the Whole Team Every department plays a pivotal role in your planned giving program’s success. With executive collaboration in place, the next step is to deepen your entire organization’s understanding of planned giving.  Educating your entire team about planned giving requires a unique approach. Streamline your efforts by: Starting small. Even if your nonprofit has the resources to invest in a large program immediately, remember that you must build the groundwork first. Once you receive executive buy-in, begin by training your development and finance team members before providing nonprofit-wide training to refine your program.  Encourage interdepartmental collaboration. Once you’ve trained those with the most prominent role in the planned giving program, involve the entire team in your program rollout. Develop department-specific training resources so everyone understands their unique responsibilities and is equipped to identify planned giving opportunities when they encounter them. Integrate planned giving into daily operations. Now that everyone is prepared to contribute toplanned giving success, you can ramp up your efforts and dedicate more time to planned giving strategies in your daily activities. Include planned giving messages in your communications with mid-level and major donors, and report on progress in your organization-wide meetings.  Your team will undoubtedly have questions when implementing such a transformative giving initiative. Give them plenty of time to adjust, get the information they need, and become comfortable with your planned giving strategy.  More Best Practices for Collecting Planned Gifts Your planned giving approach will depend on your nonprofit’s unique goals and strengths, but all organizations should keep these best practices in mind:  Handle planned giving delicately. By its nature, planned giving can be a sensitive topic, and your team must handle it with care. When approaching prospects about deferred planned giving options, keep the focus on securing a legacy. Initiate these conversations strategically, timing-wise; pay attention to donors’ personal lives and giving behavior to avoid coming across as insensitive, pushy, or out of touch. Cross-promote planned giving with other fundraising strategies. Asking for planned gifts on their own can be challenging, but the conversation can start more organically when introduced alongside other asks. For instance, you might pitch planned giving opportunities as part of your capital campaign appeals, positioning them as a component of a long-term, proactive fundraising approach.  Keep donors in the loop about future activities. Showing impact is critical for building donor trust, but it can be challenging for planned gift supporters to visualize their future impact. Keep them informed about future initiatives so they understand how you’ll use their donations. If you don’t know the exact programs or initiatives yet, speak about how you envision expanding your mission.  Offer and maintain educational materials. If your supporters are aware of planned giving, they might have preconceived notions that can reduce their likelihood of donating. Create donor-facing materials that explain how planned giving works, the types of planned gifts you collect, and the benefits of participating. In addition to pamphlets and a page on your website, offer planned giving informational sessions where your senior leaders can walk interested donors through the process. As you roll out your planned giving program, watch how donors react and adjust your outreach approach. Also, collect their feedback to iterate on your efforts and align with their needs and preferences. Wrapping Up If you’re eager to get started with planned giving but need additional support, look no further than Orr Group. Orr Group applies a business mindset to provide sustainable, revenue-driving solutions for our nonprofit partners. Get in touch to learn more about our planned giving services, from strategy development to management and administration. Steve Orr is the Co-Founder and Managing Partner of Orr Group. Steve draws from his investment banking and finance background to bring a problem-solving approach, a focus on metrics, and an outcomes-driven perspective to the nonprofit sector.