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  • W. Scott Hurt, CFP®, CPA

4 Simple Ways A Financial Advisor Can Improve Your Giving Strategy


4 Simple Ways A Financial Advisor Can Improve Your Giving Strategy

Whether it’s because it’s a wonderful way to fulfill a holiday tradition and give back to organizations, causes, and communities you care about or it’s the cherry on top of your tax planning strategy, year-end is the most popular time to donate to charity.


The way you give can have as much impact as what you give, and a financial planner can help you hone your giving strategy so you can make the most of every donation.


There are many key issues to consider before year end. But today, we are going to look at four simple ways a financial advisor can strengthen your giving strategy.

1. An advisor can help you bring intention to the giving plan.


Each part of your financial plan should have an intention. You’re likely intentional with the charities you give to or the causes you support, but what about the way you give?


All the elements in your financial plan are optimized for you and your life, and charitable giving should be no exception.


You can bring intention to your charitable giving by making the most of tax-smart gifting strategies, and building giving as part of your regular financial plan, not just during the holidays.


If you are like most people, you likely write a check or donate cash to charities.


While that donation does help your organization of choice, there are additional ways to reduce taxes by improving your giving strategy and tailoring it to you.


Let’s take a look at a few key ways to bring more intention to the way you give this year.

2. Give with a Donor-Advised Fund.


A donor-advised fund (DAF) allows you to make charitable donations into an investment account that can grow over time. You still get to deduct the contribution, but the donation can be invested within the DAF and you can later decide to distribute all or a portion of the account to a qualified charity.


DAFs are a great way to involve your family in charitable efforts and can be a pleasant part of your holiday tradition. Before the family gathering, have each person research and select a charity to discuss. Then, as a group, the family can decide on how to make the annual gift.


This process can help establish a family legacy of charitable giving.


It’s also a great way to compartmentalize your giving for the year or multiple years.


Simply having a DAF account established makes you more likely to carry through with your giving in the first place.


If your situation calls for it, donor-advised funds allow you to maintain your annual giving while taking advantage of charitable bunching.


Charitable bunching is a strategy of making multiple years’ worth of regular donations at once to surpass the standard deduction ($12,400 single filers and $24,800 married filing jointly in 2020). If those donations are to a donor-advised fund, you can still distribute them in the year you would have otherwise donated directly.


3. Retirees should consider a Qualified Charitable Distribution.


If you are subject to take an RMD and make regular charitable donations, then a qualified charitable distribution can be a big tax break for you.


A qualified charitable distribution, or QCD, is a distribution made directly from your IRA to a charitable organization.


Three major benefits of a QCD include: