True wealth is not measured solely by the value of our accounts. It can also be measured by the lives we improve, the opportunities we create, and the communities we strengthen.

Charitable giving allows us to support the organizations and causes we love—our churches, food pantries, schools, hospitals, youth programs, cultural institutions, and countless other nonprofits doing important work. It is an opportunity to turn financial success into lasting significance.

The good news is that thoughtful charitable planning may allow you to make a greater impact while also using your financial resources more efficiently. Here are three strategies worth considering.

Donor-Advised Funds

A donor-advised fund, commonly called a DAF, can be thought of as a charitable investment account.

You make an irrevocable contribution to the fund and may be eligible for a charitable tax deduction in the year of the gift. The assets can then be invested for potential growth, and you recommend grants to qualified charities over time. Although the sponsoring organization has legal control of the contributed assets, you retain advisory privileges over grants and investments.

A DAF can be especially valuable when you:

• Want to make one larger charitable contribution today but distribute the money to charities over several years.
• Have an unusually high-income year.
• Want to “bunch” several years of charitable gifts into one tax year to help exceed the standard deduction.
• Want to involve children or grandchildren in family giving decisions.
• Prefer a convenient way to organize contributions to several different charities.

A DAF can help transform charitable giving from a series of individual transactions into a thoughtful, long-term family tradition.

Donating Appreciated Stock

Many people automatically reach for their checkbook when making a charitable gift. However, donating appreciated investments directly to a charity or donor-advised fund may be a more tax-efficient choice.

Suppose you own stock that has increased substantially in value. If you sell it, you may owe capital-gains taxes. If you donate the shares directly, you may avoid recognizing that gain and, when the applicable requirements are met, may also qualify for a charitable deduction based on the investment’s fair market value.

The charity can then sell the shares and use the proceeds to support its mission.

This approach may allow you to:

• Give more than you might have given in cash.
• Remove an appreciated and potentially concentrated investment from your portfolio.
• Avoid realizing the embedded capital gain.
• Preserve cash for other financial priorities.

As a general rule, it is often better to donate appreciated investments and retain cash. Investments that have declined in value usually require a different strategy: consider selling the investment, recognizing the loss, and then donating the cash.

Qualified Charitable Distributions

For IRA owners age 70½ or older, a qualified charitable distribution, or QCD, can be another powerful giving strategy.

A QCD transfers money directly from an eligible IRA to a qualified charity. When properly completed, the distribution is generally excluded from taxable income and can count toward all or part of an IRA owner’s required minimum distribution.

This can be particularly valuable for someone who:

• Must take required minimum distributions but does not need all the income.
• Gives regularly to a church or other charitable organizations.
• Does not itemize deductions.
• Wants to reduce the amount of an IRA distribution included in adjusted gross income.

A QCD must be paid directly from the IRA to an eligible charity. Donor-advised funds generally cannot receive QCDs, and a QCD that is excluded from income cannot also be claimed as a charitable deduction. Annual limits and other requirements apply, so coordination with your financial advisor, IRA custodian, and tax professional is important. The IRS provides additional guidance on QCD eligibility and requirements.

Giving With Intention

Tax savings should rarely be the sole reason for making a charitable gift. They can, however, help us give more intelligently and potentially make a greater difference.

The larger question is: What do we want our wealth to accomplish?

Wealth gives us choices. One of the most meaningful choices we can make is to use a portion of it to strengthen the people, organizations, and communities that have enriched our own lives.

You do not need to establish a private foundation or make a million-dollar gift to create an impact. Consistent generosity matters. A scholarship can help a student begin a new chapter. A gift to a food pantry can help a family through a difficult season. Support for a church, hospital, shelter, or youth organization can improve an entire community.

Financial success can provide security, independence, and freedom. But it can also provide something even more enduring: the ability to help others.

That is the heart of doing great by doing good—using the wealth we have accumulated not only to build a better life for ourselves, but also to build a better world around us.

Want to learn how you can Do Great by Doing Good? 

Charitable giving strategies involve tax and legal considerations that vary by individual situation. Consult your financial, tax, and legal professionals before implementing a significant charitable gift.