5 Things Smart Givers Know
At the National Christian Foundation (NCF), we’ve been surprised to learn that the old 80/20 rule is still at work today when it comes to giving. Only a small percentage of givers use techniques that maximize their effectiveness, while the majority are unaware that they are collectively paying millions in taxes that could be funding the charities they are passionate about.
So which group are you in? If you’d like to make sure you’re aware of the valuable tools and strategies that smart givers are using to make a greater impact, here are our top five ideas:
- Use a Giving Fund (donor-advised fund): For many years now, donor-advised funds have grown increasingly popular as a vehicle for charitable giving. An NCF Giving Fund is a donor-advised fund that works like a charitable savings account. You get a charitable deduction when assets are contributed, and then the money in your Giving Fund can be invested and grow tax-free. A Giving Fund, which you can access online anytime, allows you to decide the amount, timing, and recipient of each of your charitable grants.
- Stop writing checks: Cash is the worst way to fund your giving. It’s surprising but true. Gifts of cash are after-tax dollars exchanged for a charitable deduction. But by gifting appreciated assets – such as securities, business interests, and real estate – you may enjoy a fair market value deduction and frequently avoid the capital gains tax. Essentially, you are giving pre-tax dollars and still getting the charitable deduction – a double benefit. Your Giving Fund makes it easy to contribute appreciated assets, and NCF is recognized as an industry leader in handling these types of gifts.
- Plan ahead for tax events: Many people sell and then give, missing out on the double benefit derived from gifting pre-tax dollars. Your charitable options include not only gifting a full or percentage interest in the asset outright to your Giving Fund, but also gifting the asset to a split-interest arrangement such as a charitable remainder trust or charitable gift annuity. These arrangements can pay you income in retirement.
- Have a charitable shareholder: One smart strategy is gifting a percentage interest in your business or income-producing real estate to your Giving Fund. For instance, if you give a 10 percent (non-voting) interest in your company, 10 percent of the company’s profits and distributions can automatically flow to your Giving Fund. Then, you can recommend grants from your Fund to your favorite charities. This strategy often provides several tax benefits, including a large, up-front charitable deduction for the fair market value of the gifted interest and reduced taxes on the ongoing profits and ultimate sale of the business.
- Give generously through your estate: Bill Gates and Warren Buffett have traveled the globe, encouraging billionaires to pledge and give away at least half their fortunes to charity at death. If you have been blessed with wealth, check out givingpledge.org to read the reasons why many respected business leaders are leaving a charitable legacy. A Giving Fund is a simple, easy solution for leaving a legacy.