New Year-New Planning Opportunities

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A new year brings new tax planning opportunities. One of the best is the Charitable IRA Rollover, which is now a permanent law that allows significant tax and estate planning opportunities for donors over 70 ½ years old.

A Qualified Charitable Distribution (QCD) allows an IRA distribution to go directly to charity, instead of to the IRA owner. This avoids all tax consequences to the donor, such as increased taxability of Social Security benefits. The QCD also counts toward the annual required minimum distribution (RMD). Because the IRA and QCD is pre-tax and does not count as taxable income to the donor, no charitable deduction is taken either.

Further requirements of a QCD are as follows:

  • IRA owner must be at least age 70 ½ on date of distribution
  • Distribution is limited to $100,000 per calendar year per individual
  • Only IRA distributions qualify, not other retirement plans like 401K
  • Distribution must go to public charity (IRC Section 170(b)(1)(A)) and thus cannot go to a private foundation or a supporting organization
  • Check must be made payable directly to charity
  • Distribution may not be used for donor-advised funds
  • Donor may not receive any quid pro quo benefit, which prevents funding any split interest charitable trusts (such as charitable remainder trust or charitable lead trust)

It is never too early in the year to proactively tax plan and to consider sending a portion of your RMD to charity. Consult your advisor for your specific circumstances, and contact us to help you achieve your philanthropic goals.  Give our development team a call at 1-800-888-1842 if you want to visit about how the IRA rollover can accomplish your philanthropic goals.