Giving and Receiving Income for Life
Recently, we shared information about the advantages of arranging a qualified charitable distribution from an individual retirement account (called an IRA QCD). This is a great way for an IRA owner to make a charitable gift and avoid income taxes while having the QCD count toward any required minimum distribution (RMD) for those over 73.
In fact, it is a smart way for most IRA owners 70½ and older to make their charitable gifts.
Planning for Your Future Needs
While most people who take advantage of this strategy have other income sources, more people in their 70s and 80s or older are concerned about longer life expectancies and the possibility of depleting the funds in these retirement accounts because their RMDs increase with age.
Prior generations often benefited from pension or annuity plans that provided lifetime payments typically for the plan recipient and perhaps a spouse. In the 1980s, there was a shift away from pension plans to defined contribution plans, like IRAs, 401(k)s, 403(b)s, etc., which required distributions that increased with age during retirement. With the 70+ population growing rapidly, more individuals may wish to consider planned gift strategies that provide lifetime payments.
Options to Consider
There are several plans that can combine lifetime income with your philanthropic objectives. Charitable gift annuities and charitable remainder trusts can be created to provide an income stream for life. One special way to do this is with a one-time election to use an IRA QCD to fund a gift annuity or charitable remainder trust with up to $55,000 for yourself or for you and your spouse. (This provision was added to legislation several years ago to allow individuals additional flexibility to utilize IRA funds for both personal and charitable purposes.)
It is also possible to establish charitable gift annuities and charitable remainder trusts funded with cash or appreciated property, like stocks, with multiple charities.
Learn More
These plans are relatively straightforward but must follow specific IRS rules and regulations. We can assist you with general questions, but you should also discuss these arrangements with your family and advisors to determine if they are a good fit with your personal and philanthropic plans.
If appropriate, we can work with your advisors, trustees or retirement plan administrator and perhaps a third party like a community foundation to help you consider various gift options. For example, it is even possible to arrange a split-interest gift like a charitable gift annuity or a charitable remainder trust that provides life income payments that will begin only if you live to celebrate your 100th birthday!
Regardless of your individual circumstances, it is nice to know that there are many smart ways and tax-wise ways to support your favorite charities while also providing for your personal needs.
Contact Us
If you have already included us in your plans, please consider letting us know so we can acknowledge you. Our Executive Director, Forrest Higgins, can be reached at 619-440-1600 or forrest@bgcec.org; thank you!