The SECURE ACT and charitable giving from IRAs

The SECURE Act, which stands for Setting Every Community Up for Retirement Enhancement, took effect Jan. 1, 2020, and changes rules governing retirement plans, including provisions relevant to making charitable gifts from an Individual Retirement Accounts (IRA). Under the SECURE Act, a Qualified Charitable Distribution (QCD) remains a terrific way to make a tax-free gift to charity using your traditional IRA.

A QCD allows you, starting at age 70½, to direct IRA distributions—up to $100,000 per year per person— directly to a qualified 501(c)(3) charity, while excluding the amount distributed from income. You can experience the joy of giving without counting gifts as income and paying tax on it. Check out this FACT SHEET about giving from a QCD.

Two key changes of how the SECURE Act may affect you:

• The SECURE Act increased the age at which you must start taking required minimum distributions (RMDs) from age 70½ to 72. Once you reach 72, one of the great benefits of a QCD is that it will count towards your RMD. However, even if you have not reached age 72, there are still good reasons to consider a QCD at age 70 ½. A QCD offers all the benefits of an income tax charitable deduction, even if you don’t itemize your deductions. You can’t claim a deduction for your QCD, but your QCD is not included in your income. Your QCD is always tax-free gift to charity.
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• Another change brought by the SECURE Act is the elimination of the stretch IRA for many beneficiaries. Previously, non-spousal beneficiaries could stretch out the required minimum distributions over his or her lifetime. Now, they must withdraw and pay income tax on all funds within 10 years. This change means that it may be more advantageous to name a nonprofit organization as the beneficiary of an IRA and set aside other assets to pass on to loved ones. A nonprofit organization is not subject to taxes as an individual heir would be.

Flexible options with the Community Foundation

The Community Foundation makes it easy to establish a new fund or contribute to an existing fund utilizing an IRA. A QCD may establish or add to an existing non-advised fund at the Foundation, including a designated, scholarship, unrestricted or field of interest funds. In order to qualify for a QCD, donors may not maintain any advisory capacity of the fund once established, therefore, donor-advised funds are ineligible to accept QCDS.

We encourage you to consult with your professional advisors for individual guidance before making a significant gift to charity.

We welcome the opportunity to help you achieve your charitable goals with a fund that suits you. Contact Michelle Lippart Hardwick by email or (920) 702-7622 to learn more.

Interested in exploring your own fund? We have a variety of flexible fund options. Check them out here.