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Insights & guidance
Generosity & giving

Maximize your charitable donations

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Multi-ethnic male and female creative business professionals huddling together in office
Luis Alvarez/Getty Images

How to create a strategy for generosity that helps you have a greater impact.

These days, there seems to be a never-ending stream of calls, emails and letters asking for donations. With all those requests, it can really put you in a bind. You want to help, but it can be overwhelming deciding who or what to support and how much to give.

The solution? Reconsider your approach to giving. If you build it into your financial strategy, you benefit in several ways. You have the satisfaction of knowing you’ve thoughtfully chosen who and what you want to help. You have a plan in place that makes generosity happen. You may be able to give more, and you might even gain some tax advantages.

That’s just what Kristin and Chris Daniels discovered. In 2019, Thrivent wealth advisor Jennifer Cords, along with Thrivent Charitable Impact & Investing ™ (Thrivent Charitable), helped the Daniels structure their giving with a donor-advised fund (DAF).

Like many people, the Daniels, from Plymouth, Minnesota, gave regularly to their church and other organizations, reflecting their deeply ingrained values around generosity. “What we have isn’t ours forever,” says Kristin. “It’s something we’ve been given, and we see it as our obligation to give away. We have more than enough, and we can share that.”

But they felt their way of giving wasn’t as planful as it could be, and they also wanted an approach that would help them teach their two boys the importance of being generous.

The DAF was the best choice for the Daniels, but it’s just one way you can structure giving. There are financial tools that fit a wide range of incomes and allow you to donate assets or money. With each of them, you set the course according to how and who you want to help. In doing so, you make sure to meet your goals, and the organizations you support benefit, too, by knowing they can count on you. If you also want the option of giving money spontaneously, you can build that into your strategy as well.

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Set goals and target causes

The first step to integrating contributions into a financial strategy is deciding how much you want to give.

“We tell our clients to think about giving much like you think about saving for retirement, college or a family vacation,” says Cords, founding partner at Cedar Cove Wealth Partners in Bloomington, Minnesota. “You typically set specific goals for how much to put away for retirement in a given year. It should be the same for generosity. If you want to give 10% back, then make sure that’s included in your overall financial planning.”*

Mandy Tuong, president and CEO of Thrivent Charitable, agrees. “We help clients decide from a numbers perspective and what is in their heads,” she says. “And we also help them consider what is in their hearts.”

You then need to decide where to donate your funds. The Daniels were interested in businesses that support women. But if you have causes in mind and don’t know what organizations work in those areas, Cords suggests several resources:

Charities Review Council

It evaluates the internal practices and governance of charities to help you evaluate an organization beyond financials and programming.  Smartgivers.org

GuideStar

It allows you to search for charities by different criteria. You must set up an account to use the service, but it’s free.  Guidestar.org

Charity Navigator

This website researches the fiscal responsibility of a charity.  Charitynavigator.org

GiveWell

This website rates charities according to how much good they do per dollar spent.  Givewell.org

Thrivent Charitable researches organizations for their clients. “We are part of national and international networks of grant-makers,” says Tuong. “And we leverage the collective wisdom of our own donors as well, to get the best information on who is doing great work.”

You typically set specific goals for how much to put away for retirement in a given year. It should be the same for generosity. If you want to give 10% back, then make sure that’s included in your overall financial planning.
Jennifer Cords, Cedar Cove Wealth Partners

Find what works for you

Once you’ve established your giving goals, talk with your financial advisor to determine the best way to work toward them. These are some of the more popular options.

Cash donations

If your preference is to write checks or use a credit card, consider setting up scheduled contributions to a charity of your choice or to a donor-advised fund (see below). That way, you won’t have to worry about remembering to do it, and the organization can count on your regular donation. Qualified taxpayers may be able to take an additional $300 per person as a deduction for tax year 2021, which is a direct reduction in reported income.1

Donor-advised fund

“A donor-advised fund is essentially an account you set up that is solely devoted to making charitable donations,” says Cords. It’s the fastest-growing tool for giving in the U.S., according to the National Philanthropic Trust,2 for several reasons. They allow donors to make grants to charities whenever it makes sense for them and choose investment options for the funds. They also offer lots of options for the types of assets that can be donated and they’re easy to set up.3 In fact, you can set up a DAF to donate money and other assets (more about that later).

Here’s how a DAF works. You work with a donor-advised fund sponsor to make a gift of cash or other assets that will fund your donor-advised fund. Many sponsors will have minimum required gifts to open a fund—averaging $5,000—and some like Thrivent Charitable, have no minimum, Tuong says. As soon as you make the gift, the value of the gift (i.e., if it is cash, the amount given, or if it is another type of asset, like real estate, its appraised value) is considered a donation and may be eligible as a tax deduction that year. Then you choose when to grant money from the fund and which charities to give it to. Any investment growth in the fund stays in the fund, so it’s not taxable and it increases how much you can give.

The Daniels worked with Thrivent Charitable to set up their DAF. The fund4 they chose to invest in supports women-owned businesses, something they feel passionate about. So, while their money sits in that fund, they’re helping a cause they care about. “We set it up because it makes it so easy to give,” says Kristin. “We can put money aside on a schedule that works for us and give to the charity of our choice, plus while it’s sitting in the DAF account, it’s invested in something that has impact.”

When statements from the DAF arrive, the whole family reviews it. “The DAF gives me an opportunity to talk to our kids about how we give,” says Kristin. “We can go through the statement with them and they can see what we’re helping.” It also gives the boys a chance to talk about what causes they would like to help.

Qualified charitable distribution

When owners of IRAs reach a certain age (currently age 72), they must make withdrawals from their accounts, called required minimum distributions (RMDs).5

“These withdrawals typically would be considered income and subject to income taxes,” says Alan Cox, director of estate and trust planning, in a division of Thrivent Trust Company. “But you could instead create a Qualified Charitable Distribution (QCD) with the RMD, where the withdrawal becomes a donation to an organization of your choice. The advantage is that you’re making a contribution, and you won’t have to pay taxes on the IRA withdrawal.” However, there are various requirements that must be met for a distribution to qualify as a QCD; you should work with your financial advisor and tax professional to ensure requirements are met.

With a QCD, the money is transferred directly from the IRA to the designated charity. Charities like Thrivent Charitable also offer funds that can accept QCDs where donors name the charities when creating the fund that can benefit from the fund over time.

You also can make a QCD before age 72. “If you have an IRA, you can make a QCD starting at age 70½,” says Cox.

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Other ways to give

While donating money is popular, there are other ways to be generous, and they may have some tax advantages as well. These include:

Stock

You can transfer stock to a charitable organization.

Life insurance

You can designate a charity as a  beneficiary  or you can assign the contract itself to the charity.

Will

Your estate can be left to a charity.

Home

You may be able to set up what’s called a “remainder interest” where you gift your home to a charity while you’re alive but are allowed to live in it for the rest of your life. Upon your death, the charity gets the home.

Charitable Gift Annuity

You can set up an annuity with a charity. You make the donation and the annuity then pays you an income. Upon your death, the remainder of it goes to the charity. The minimum typically required for this type of an annuity is $5,000.

Trust

There are trusts that are structured for giving. A charitable remainder trust is set up so that you or others you designate have an income stream from the trust while you’re alive and a charity receives the remaining proceeds upon your death. A charitable lead trust provides support to a charity while you’re alive and the remaining proceeds go to your family or others upon your death.

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Incorporate giving into your financial strategy

All of these tools can be a way of supporting your favorite charities directly, or they can be used to fund longer-term giving vehicles like a donor-advised fund. Treating generosity as you do your other financial goals allows you to be more planful about your giving. “But it doesn’t mean you give up flexibility,” says Cords. “Your strategy can be re-assessed as frequently as you want, and you can and should make adjustments along the way.”

The Daniels plan to stick with their DAF but they remain open to who and what they want to support. “Our goal is to give away all of the funds in the donor-advised fund in a two-year cycle,” Kristin says. Then they’ll reload it and align it with their giving goals at that time.

Incorporating their generosity into their financial strategy takes away the stress of deciding whether and how much they can give. “It’s so comforting knowing that decision has already been made,” says Kristin, “and we can give freely without worry.”

Financial advisors are at the forefront of helping you make charitable giving a core element of your financial strategy. When you work closely with a financial advisor, you’re on the way to gaining a greater sense of gratitude for what you’ve earned and more clarity than ever about how to help give generously to your family, community and society.

Don’t have a financial advisor? Connect with someone today.

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1Kiplinger, https://www.kiplinger.com/taxes/tax-law/603037/tax-changes-and-key-amounts-for-the-2021-tax-year
2 https://www.nptrust.org/philanthropic-resources/philanthropist/resources/2020-daf-data-highlights/
3 The 2021 DAF Report | NPTrust
4WomenInvest Portfolio, https://www.thriventcharitable.com/about-us/financials
5 https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-required-minimum-distributions-rmds

*Advisory services available through investment adviser representatives only.

The client’s experience may not be the same as other clients and does not indicate future performance or success.

Thrivent Charitable Impact & Investing™ is a public charity that serves individuals, organizations and the community through charitable planning, donor-advised funds and endowments. Thrivent Charitable Impact & Investing works collaboratively with Thrivent and its financial advisors. It is a separate legal entity from Thrivent, the marketing name for Thrivent Financial for Lutherans.

Donors must itemize deductions to receive a charitable income tax deduction. Charitable giving can result in tax, legal and financial consequences. Thrivent, its financial professionals, and Thrivent Charitable Impact & Investing, do not provide legal, accounting, or tax advice. Consult your attorney or tax professional.

Thrivent Charitable, Thrivent and its financial professionals do not provide legal, accounting or tax advice. Donors should consult their attorney or tax professional.

Trust and investment management accounts and services offered by Thrivent Trust Company are not insured by the FDIC or any other federal government agency, are not deposits or other obligations of, nor guaranteed by Thrivent Trust Company or its affiliates, and are subject to investment risk, including possible loss of the principal amount invested.Trust and investment management accounts and services offered by Thrivent Trust Company, a subsidiary of Thrivent is the marketing name for Thrivent Financial for Lutherans and an affiliate of Thrivent Investment Management Inc.  Neither Thrivent Investment Management Inc., a FINRA and SIPC member, nor its associated person(s) is offering any product hereby.  Certain Thrivent Investment Management Inc. associated persons refer prospective clients to Thrivent Trust Company.
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