The Healing Wallet

A weekly blog focusing on financial guidance to help you manage wealth, advance your career, and integrate your faith. 

Presented by Integritas Wealth Strategies 

By Daniel Heidel 

---

Issue No. 6

---

Faith-Based Donor Advised Funds: Strategic Charitable Giving for Christians

Create your family’s private foundation without the complexity or cost.

The Rockefellers have one. So do the Gates family and countless other wealthy philanthropists. Private foundations provide tremendous flexibility for charitable giving, but they require millions of dollars, extensive legal documentation, and ongoing administrative complexity that puts them out of reach for most families. Enter donor advised funds (DAFs)—a revolutionary tool that delivers 80% of a private foundation’s benefits at a fraction of the cost and complexity, making strategic charitable giving accessible to Christian families at virtually every income level.

Understanding Donor Advised Funds: Your Personal Giving Account

A donor advised fund functions like a charitable investment account where you contribute money or assets, receive immediate tax deductions, and then recommend grants to qualified nonprofits over time. Think of it as a dedicated savings account for your charitable giving, but one that can grow through investments while you decide how to distribute the funds.

Doctors Susan and John, a pediatrician and engineer respectively, discovered DAFs when they wanted to give substantially to their church’s building campaign but also maintain ongoing support for medical missions. Instead of writing separate checks throughout the year, they contributed $50,000 to a DAF in December, received the full tax deduction that year, and then distributed grants to various ministries over the following 18 months as they felt led.

The beauty of DAFs lies in their simplicity. You make contributions when it’s financially advantageous, receive immediate tax benefits, and then make charitable distributions according to your timeline and spiritual leading. This separation of tax timing from giving timing provides unprecedented flexibility in charitable planning.

Tax Deduction Timing: Strategic Giving for Maximum Impact

For healthcare professionals with variable income, DAFs offer powerful tax planning opportunities. During high-income years—perhaps when you receive bonuses, work significant overtime, or sell investments—you can make larger DAF contributions to offset increased tax liability. Then, during lower-income years, you can still maintain your charitable giving through DAF grants without creating additional tax deductions when you don’t need them.

The tax advantages are substantial. You can deduct up to 60% of your adjusted gross income for cash contributions to DAFs, and up to 30% for appreciated securities. If your contribution exceeds these limits, you can carry forward unused deductions for up to five additional years. This flexibility allows you to bunch charitable deductions in high-income years while spreading actual giving across multiple years.

Consider Dr. Jennifer, an orthopedic surgeon who received a $200,000 bonus from her practice. Instead of paying taxes on the full amount, she contributed $100,000 to a DAF, reducing her taxable income significantly. Over the next five years, she made $20,000 in annual grants to various Christian ministries, effectively prepaying her charitable giving while receiving immediate tax benefits.

Investment Growth: Making Your Charitable Dollars Work Harder

Unlike writing checks directly to charities, DAF contributions can be invested and grow tax-free until you’re ready to make grants. This investment growth means your charitable impact can compound over time, potentially allowing you to give significantly more than your original contribution.

Most DAF sponsors offer investment options ranging from conservative money market funds to aggressive growth portfolios. Christian families often choose balanced portfolios that align with their risk tolerance and giving timeline. If you plan to distribute funds over several years, growth investments can substantially increase your charitable impact.

The Johnson family’s $50,000 DAF contribution grew to $65,000 over three years through prudent investing. This additional $15,000 came from investment growth, not additional out-of-pocket contributions, allowing them to support an additional ministry without reducing their personal finances.

However, remember that DAF investments can also lose value. If you plan to make grants soon after contributing, consider conservative investment options to preserve capital. The goal is to enhance your charitable giving, not to gamble with money intended for ministry support.

Grant-Making Strategies: Thoughtful Distribution of God’s Resources

DAFs provide tremendous flexibility in grant-making timing and strategy. You can make grants immediately after contributing, spread them over many years, or respond to urgent ministry needs as they arise. This flexibility allows you to be more strategic and responsive in your charitable giving.

Many Christian families use DAFs to implement systematic giving strategies. Some make equal grants to their primary ministries annually, while others vary their giving based on special projects or urgent needs. The key is developing a grant-making strategy that reflects your family’s values and spiritual priorities.

Consider establishing giving categories within your DAF strategy. The Martinez family allocates 40% of their DAF to local church support, 30% to medical missions, 20% to Christian education, and 10% for responding to urgent ministry needs. This framework guides their grant-making while maintaining flexibility for God’s leading.

Family Engagement: Teaching the Next Generation

DAFs provide excellent opportunities for involving children and grandchildren in charitable giving decisions. Many families hold annual meetings to discuss potential grants, allowing children to research ministries and participate in giving decisions. This hands-on involvement teaches valuable lessons about stewardship, ministry evaluation, and strategic thinking.

The Johnson family involves their teenage children in researching potential grant recipients. Each child presents one ministry annually, explaining the organization’s mission, effectiveness, and financial stewardship. This process has deepened their children’s understanding of Christian ministries while teaching important evaluation skills.

Some families provide children with small amounts within the DAF to grant independently, teaching them to research organizations and make giving decisions. This practical experience in charitable evaluation prepares them for lifelong faithful stewardship.

Christian DAF Sponsor Organizations

Several organizations specialize in faith-based DAFs, offering investment options that align with Christian values and specialized support for ministry giving. The National Christian Foundation (NCF) pioneered faith-based DAFs and remains the largest Christian DAF sponsor, managing over $13 billion in charitable assets.

Other options include Vanguard Charitable, Fidelity Charitable, and Schwab Charitable, which offer broader investment options and lower fees but may not provide the same level of Christian ministry expertise. Choose a sponsor that aligns with your values and provides the services most important to your giving strategy.

Christian DAF sponsors often provide additional services like ministry research, planned giving expertise, and family philanthropy coaching. These services can be particularly valuable for healthcare professionals who have limited time for extensive charity research but want to ensure their giving is effective and aligned with their faith.

Ministry Vetting and Due Diligence

DAFs require grant recipients to be qualified 501(c)(3) organizations, but this status doesn’t guarantee effective ministry or sound financial management. Develop systems for evaluating potential grant recipients, considering factors like doctrinal alignment, ministry effectiveness, financial transparency, and leadership character.

Resources like GuideStar, Charity Navigator, and the Evangelical Council for Financial Accountability provide valuable information about nonprofit finances and governance. Many Christian DAF sponsors also provide research services to help evaluate ministry effectiveness and financial stewardship.

Biblical Foundation for Systematic Giving

The Bible provides clear guidance for systematic, strategic giving. In 1 Corinthians 16:2, Paul instructs believers to “set aside a sum of money in keeping with your income” each week. This principle of regular, proportional giving can be enhanced through DAF strategies that allow for more strategic timing and impact.

The concept of storing resources for future giving aligns with biblical wisdom about planning and stewardship. Proverbs 21:5 states, “The plans of the diligent lead to profit as surely as haste leads to poverty.” DAFs allow diligent planning that can increase charitable impact while providing tax benefits.

The Path Forward: Implementing Your DAF Strategy

Donor advised funds represent a powerful tool for Christian families who want to be strategic in their charitable giving while maintaining flexibility and family involvement. They provide immediate tax benefits, potential investment growth, and the ability to respond to ministry needs as God leads.

The key to successful DAF implementation is developing a clear giving strategy that reflects your family’s values and spiritual priorities. This strategy should include contribution timing, investment approach, grant-making guidelines, and family involvement plans.

Remember that DAFs are tools for stewardship, not ends in themselves. The goal is to be more effective in supporting God’s kingdom work while teaching the next generation about faithful giving and strategic thinking.

Ready to explore how a donor advised fund could enhance your family’s charitable giving strategy?