When COVID-19 hit, it became very clear that people who had donor-advised funds (Giving Funds) were able to respond faster and more safely than those who didn’t. But only a small percentage of today’s Christian givers use tax-smart techniques like this one to maximize their effectiveness.
Many generous Christians remain unaware that they are collectively paying millions (or even billions) in taxes that could go to funding the charities, churches, and nonprofit causes they are passionate about.
What about you? 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:
1. 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 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. Open a Giving Fund, or learn more in this two–minute video.
2. Stop writing checks
Cash is usually 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’re giving pre-tax dollars and still getting the charitable deduction – a double benefit. Having a Giving Fund makes it easy to contribute appreciated assets, and NCF is recognized as an industry leader in handling these types of gifts. Learn how you can give stocks, or learn more about other forms of non-cash giving through NCF.
3. Plan ahead for tax events
Many people sell a business or property and then give, missing out on the double benefit derived from gifting pre–tax dollars. Charitable options include not only gifting a full or percentage interest in the asset outright to a 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. Learn more about planning for the sale of your business or real property.
4. Gift to a charitable shareholder
One smart strategy is gifting a percentage interest in your business or income–producing real estate to a 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. Learn more about our charitable shareholder strategy.
5. Give now, or give generously through your estate
Bill Gates and Warren Buffett have traveled the globe, encouraging billionaires to pledge and give away the majority of their fortunes to charitable causes during their lifetimes. Giving now instead of later may be a better idea for you too. If you have been blessed with wealth, check out givingpledge.org to read the reasons why many respected business leaders are choosing not to hold on to their money.
You can also give through your will. NCF has a team of experts who can help you leave a charitable legacy through testamentary gifts. Read more about how you can plan to support your favorite charity as part of your estate.