The Shift from Reactive to Proactive Stewardship
Many Christian families are wonderfully generous, approaching giving as a reactive process: responding to a ministry request or writing a check at year-end from their personal cash flow. This faithful generosity is already good and honors God!
For those who wish to extend that impact, another approach involves looking at your entire balance sheet to determine how to give most efficiently. When you optimize the “how” of your giving, you often find that you can provide even more support to the causes you care about without changing your personal lifestyle. This is the essence of charitable giving strategies that honor both the Great Commission and sound financial principles.
1. The Power of Donor-Advised Funds (DAF)
A Donor-Advised Fund acts as a dedicated vehicle for your charitable intent. When you contribute to a DAF, you receive an immediate tax deduction for the full amount. However, you do not have to distribute those funds to specific charities immediately. This is particularly helpful in high-income years where you need a larger tax deduction but want time to prayerfully consider where the funds should go.
By using a DAF, you can also involve the next generation in your family’s legacy. You can appoint children as successor advisors, teaching them the discipline of wise financial planning services through the lens of biblical generosity.
2. Giving Appreciated Assets Instead of Cash
Most donors reach for their checkbooks when they want to give. However, for stewards with investable assets, cash is often the least tax-efficient asset to give. If you own stocks or mutual funds that have grown in value, selling them to give cash triggers a capital gains tax.
Instead, you can give the appreciated asset directly to a 501(c)(3) organization or into your DAF. When you do this, you generally receive a tax deduction for the full fair market value of the asset. More importantly, neither you nor the charity pays capital gains tax on the appreciation.
This strategy allows you to “rebalance” your portfolio with a Kingdom mindset. You can remove highly concentrated positions that may no longer align with your risk tolerance while simultaneously funding your charitable goals. This is a primary example of how charitable giving strategies integrate with overall wealth management.
3. Qualified Charitable Distributions (QCDs)
For stewards who have reached the age of 70.5, the IRS provides a unique tool called the Qualified Charitable Distribution. This allows you to transfer up to $111,000 per year directly from your IRA to a qualified charity. This distribution counts toward your Required Minimum Distribution (RMD) but is not included in your adjusted gross income.
By lowering your adjusted gross income, you may also reduce the impact on your Social Security taxation and Medicare premiums. It is a “tax-free” way to give that bypasses the limitations of itemized deductions. This strategy ensures that the “first fruits” of your retirement savings are directed toward eternal purposes rather than unnecessary taxation.
The FaithWise Difference
At FaithWise Advisors, we believe that every dollar is a tool for stewardship. Our role is to help you navigate the technical complexities of these strategies while ensuring they remain rooted in your values. For clients who desire it, we can also apply biblically responsible investing screens to ensure that even the funds waiting to be given in your DAF are aligned with your values.
Ready to optimize your generosity? Align your financial goals with your eternal values today.
Contact FaithWise Advisors: https://faithwiseadvisors.com/contact/
Key Takeaways:
- Stewardship involves moving beyond reactive giving to proactive, strategic generosity.
- Donor-Advised Funds (DAFs) allow for immediate tax benefits while providing a “stewardship account” for future gifting.
- Giving appreciated assets, such as stocks, can eliminate capital gains taxes and increase the total gift to ministry.
Risk Disclosure: Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results.
This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. The content is developed from sources believed to be providing accurate information; no warranty, expressed or implied, is made regarding accuracy, adequacy, completeness, legality, reliability, or usefulness of any information. Consult your financial professional before making any investment decision. For illustrative use only.