Getting a Huge Bang for Your Charitable Buck

Optimizing financial gain with charitable contributions

When doing some professional advisory board work for the Jewish Community Foundation, I was blown away by the “bargain” they are offering potential donors. When one of my “number crunching” CPAs understood the deal, he commented that practically all clients and readers interested in supporting Jewish causes should consider taking advantage of this extremely generous offer by the Jewish Community Foundation.

First, the basics.

We have had several clients who wanted to establish an endowed chair at their university but they did not have the cash available to make an outright donation. Our solution was to collaborate with the university to establish the university as the owner and beneficiary of a life insurance policy on the individual for the value of funding the chair. Technically, the university purchased the insurance, but our client wrote a check for the premium to the university. The client took advantage of the charitable tax deduction. The university would then write a check to the insurance company for the premium. This process repeats until all the payments on the policy are complete. Then when the policy “matures” (a nice way of saying the insured individual, or the individual and their spouse if it is a survivorship policy, dies), the university is the beneficiary of the policy. The math on this type of charitable method works and it is a win for the donor, a win for the charity, and a loss for the I.R.S.

That is one scenario that would apply to most legitimate charities that offer this plan.

But the Jewish Community Foundation has the best offer I have seen if you are interested in supporting the broad work of the Foundation. The Foundation has a program that pays half of all premiums that create permanent endowments by naming The Jewish Federation of Greater Pittsburgh as the irrevocable owner and beneficiary of an insurance policy on your life or the life of you and your spouse.

You can choose to specify the purpose of the life insurance benefit, such as creating or augmenting an unrestricted endowment fund, a Lion of Judah Endowment or Legacy Fund, or a special purpose fund. This is an incredible way to make charitable contributions.You receive the tax benefit from your contribution, you can fund a large endowment even if you do not currently have the funds to do so, and you get to be the donor of a large contribution that is sustained in perpetuity. The process is easy to implement and administer, and you are only responsible for one-half of the premiums. You will be recognized in the Foundation’s Legacy Society among the most generous philanthropists in the Jewish community in perpetuity.

To qualify for premium splitting, a policy must meet these three requirements:

  1. Policies must be issued by companies rated  “A” or better by two or more major rating services.
  2. Illustrating proposals must show that the policy is fully funded in three annual payments.
  3. The contract can be individual life or survivorship life.

All of these conditions, assuming you are insurable, are easy requirements.

A simple case study will illustrate how this might work for you. To answer my own questions, I contacted one of my advisors and asked them to illustrate what a policy might look like for my wife and me. Just so you know, premiums are proportionate to the death benefit. If you want to double the benefit, you would double the premium.

Jim and Cindy, a couple in their 60s, want to endow their $12,500 commitment to the Annual Campaign in perpetuity. The endowment fund uses a 5% income formula, so they need to establish a $250,000 endowment to generate their $12,500 annual gift. They could stipulate a bequest in their wills for $250,000 or they could take advantage of a premium splitting policy.

Jim and Cindy receive a preferred, non-smoking* quote from an approved insurance provider. The Foundation acquires a $250,000 survivorship policy on the couples’ lives that requires three premium payments of $24,305, for a total of $72,915. Each year, for three years, Jim and Cindy’s premium payment is half the total annual premium and each year the couple claims the $12,152.50 as a charitable contribution. The Foundation also pays $12,152.50 each year for three years. After three years, the policy’s premiums are met. Ultimately, Jim and Cindy will have contributed $36,475.50 to establish a $250,000 endowment which will ensure their $12,250/year commitment to the Annual Campaign in perpetuity. That is a winning strategy, both for the couple and the Foundation.

I find this program very exciting. In addition, since I own a company that does this type of insurance work, I will contribute 100% of my commission to the Foundation for anyone who purchases this type of insurance through me.

*Preferred, non-tobacco: 3 premiums @ $9,722 per $100,000.
Standard, non-tobacco: 3 premiums @ $11,016 per $100,000

If you are interested in more financial information (we have written 5 best-selling financial books, many peer-reviewed articles, have 185 hours of our radio archives, etc.), we encourage you to visit our website, It has a wealth of valuable free material of special interest to IRA and retirement plan owners, or please call (412) 521-2732 for a free copy of The Ultimate Retirement and Estate Plan for Your Million-Dollar IRA or to see if you qualify for a free second opinion consultation.

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