Giving Strategies in Life
Qualified Charitable Distributions (QCD’s)
This is perhaps the most under-utilized item on the list. This strategy has been around since 2006 but it didn’t gain broader adoption until the income tax standard deduction increased in 2018 – because fewer people itemize deductions on their tax returns and, as a result, fewer people actually realize a tax deduction for charitable gifts. QCD’s solve that issue. By giving directly from your IRA (in the form of a QCD), you can deduct your gift and it also counts towards your RMD. The result is that you get to take the standard deduction on your tax return AND deduct charitable gifts (which usually fall under itemized deductions) – so you get to double-dip. This strategy is specifically available to those age 70 ½ and older. The strategy makes sense if, (A) you are subject to Required Minimum Distributions (RMD’s) on your IRA, and (B) you give to a church/charity each year. If you meet these conditions, you should discuss this option with your advisor and consider making those charitable gifts directly from your IRA. Click this link and this link for more details on the subject. (Note that you may begin utilizing QCD’s at age 70 ½ even though RMD’s are not required until later).
Direct (Outright) Gifts
This is the typical method most individuals use because it is quick and easy. You might physically give cash or write a check. To be more efficient and facilitate easier record-keeping, you may schedule a recurring (e.g., weekly or monthly, etc.) gift to be drafted from your checking account or mailed via your bank’s online bill-pay service. Note that online giving via credit cards and ACH bank draft usually involve a fee being charged to the receiving church/charity, so consider avoiding that when possible or increasing your giving to cover those costs (which are usually in the range of 1-3%).
Appreciated Stock
It might make sense to gift appreciated securities “in-kind” – which means giving the actual shares of stock -- rather than giving cash outright. Doing so may allow you to avoid paying capital gains taxes on the gains in the stock. You might consider coordinating with your advisor to do this as part of an annual rebalancing of your portfolio. If you have appreciated stock in a taxable account and are making a significant gift, consider this option as an alternative to giving cash. It saves you tax and the receiving party avoids tax by being a qualified 501(c)(3) organization (tax-free organization).
Donor Advised Funds
Want more flexibility in your giving? Need to make a large donation now but aren’t sure which charity you would like to benefit? Do you need to remove assets from your estate now and decide later how to distribute to charity? Consider using a donor advised fund. Click here for more information.
Charitable Lead Trusts
A charitable lead trust (CLT) is an irrevocable trust designed to provide financial support to one or more charities for a period of time, with the remaining assets eventually going to family members or other beneficiaries. This is one of the more complex strategies, so please read further and consult with an advisor before acting.
Giving Strategies in Death
Bequests in your Will (or via a trust)
Are you interested in making a greater impact that extends beyond your lifetime? You might be surprised how few individuals actually incorporate charitable gifts into their estate planning. Folks generally leave assets to their children – and that is understandable. But have you considered adding a charitable beneficiary to your will or trust (or IRA, see next bullet point) for a portion of your estate?
Beneficiary Designations
Did you know that you can list your church or favorite ministry/charity as a beneficiary of your retirement account, life insurance policy, or annuity? Did you also know that there is a potential tax benefit in doing so? If you plan to leave a portion of your estate to a church/charity, it generally makes sense to leave pre-tax assets, such as a Traditional
IRA or 401(k) account or a qualified annuity because qualified 501(c)(3) organizations do not pay taxes on those gifts (but your children or other beneficiaries generally would pay tax on those gifts). In this case, the charity doesn’t have to “render unto Caesar” – so the entire gift can be utilized.
Charitable Remainder Trusts
A charitable remainder trust (CRT) is an irrevocable trust that generates a potential income stream for you (as the donor to the CRT) or other beneficiaries, with the remainder of the donated assets going to the designated church/charities of your choice. Utilizing a CRT, like its sister strategy the CLT, is also complicated and should be researched further before seeking advice from a trusted advisor.
Better Stewardship, Better Giving
God is a Giver
He gives us life (John 6:33), wisdom (Jms. 1:5), rain (Jer. 5:24), increase (I Cor. 3:7), strength (Ps. 68:35), victory (I Cor. 15:57), a crown of righteousness (II Tim. 4:8), His Son (John 3:16), peace (Ps. 29:11), grace (Jms. 4:6), and the list can go on and on (and on). God is a Giver.
Of course, God also wants His people to be good stewards of what He gives them – and to follow His example and be Givers. Whether it be stewardship of the Gospel, of our lives and time, or of material resources (it all belongs to God), it isn’t always obvious what methods of giving are available to us and allow us to best demonstrate wise and godly stewardship. Rather than only being reactive givers, let’s also give thought to ways that we can also become better proactive givers. A little planning can help.
Planning to be Good Stewards
Perhaps you’ve heard the joke about the man who tried to take some of his
wealth with him to heaven. He gets to the pearly gates with a case full of gold and is stopped by the gatekeeper who reminds him that he is not allowed to bring anything with him. The gatekeeper then inspects the case and inquires of the man, “Why did you bring pavement?”
Few of us have trouble accepting Paul’s statement to Timothy in I Timothy 6:7 -- “for we brought nothing into this world, and it is certain we can carry nothing out” (NKJ) – but it is important for us to recognize that this fact does not imply that we should ignore our obligation as stewards when planning for our departure from this world. To the contrary,
the process of planning for the distribution of our “estates” is perhaps one of the most significant demonstrations of stewardship for which we are responsible. Although we know that everything belongs to God and there is vanity in possessions, we also know that we have an opportunity to accomplish good things for the Lord’s church and for the physical and spiritual benefit of others through the responsible use and distribution (sharing) of the resources God has given to us.
In short, our obligation to be good stewards applies not only to the management of our resources during life, but also at life’s end. So we may ask ourselves the following questions:
(1) Are we being good stewards here and now?
(2) Have we made plans to be good stewards when leaving this world behind?
Not everyone is in the position of having an estate (assets/property) to distribute… but many are blessed to be in such a position. What about you? What about your loved ones?
Estate Planning Explained
This is a neglected subject – partly because of that fact that it deals with the consideration of one’s death, which tends to be unpopular; and partly because it is perceived to be, and in some cases is, complex. So what is estate planning?
An “estate” is basically all the rights, titles, and interests that a person (living or deceased) has in property (assets). In other words, your estate consists of everything you own. There are many facets of estate planning, but the foremost purpose of estate planning, for most individuals, is to communicate one’s desires regarding the distribution of his/her property during life and especially after death. Like the instruction given to King Hezekiah in 2 Kings 20:1, this is a part of “setting your house in order,” and it is typically accomplished through the designation of beneficiaries and/or the writing of a will (and occasionally in conjunction with the creation of a trust). Perhaps the two most common goals a Christian might seek to achieve via his/her will are (1) providing for family such as a spouse, children, or other dependents, and (2) contributing to the work
of the Lord’s church and other charitable good works. In the first case, we want to -- as much as possible -- ensure that the inheritance we leave is going to benefit and not harm the recipient(s) -- and that those to whom we leave assets can be trusted to manage those assets as good stewards. A well-conceived estate plan can achieve
these things.
As to the second goal regarding our giving to the church and worthy charitable causes, there are many ways to achieve this through estate planning, some of which may be more efficient than others. You are familiar with weekly giving and special contributions -- but there are several strategies that are often overlooked that also may benefit the receiving church/charity. We explore some of these strategies below.
It is true that you cannot take it with you…but you can “store up for yourselves treasures in heaven.”
This information is intended to give you an idea of the different forms of giving that are available to you and is not intended as legal or tax advice. You are encouraged to seek qualified legal and tax advice regarding your specific situation.