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Contribute IRA funds and receive income
A growing number of people, age 70½ or older, have been making charitable gifts of funds in their IRA. The maximum amount that can be transferred in any one year has been $100,000, though that cap will be adjusted for inflation starting in 2024. Provided the limit is not exceeded and certain other requirements are met, these transfers, known as qualified charitable distributions (QCDs), are not subject to income tax, and they will count toward required minimum distributions.
Some donors who would like to make a gift from their IRAs hesitate to do so because that would reduce their future income.
The recently enacted Consolidated Appropriation Act of 2023 allows an IRA owner, beginning in 2023, to transfer from a regular IRA up to $50,000 to fund a gift annuity or charitable remainder trust and have the transfer treated as a QCD. The income can be paid to the IRA owner, the spouse of the IRA owner or jointly to the IRA owner and spouse. In the past, you may have hesitated to make an outright gift with funds in your IRA because that would diminish your retirement account balance and the income it could generate. Now that it is possible to retain income from the contributed IRA funds, an IRA gift may be possible.
Example: George, 76, who has $800,000 in his IRA, transfers $50,000 from the IRA to create a gift annuity. Afterwards, he will have $750,000 in his IRA to earn income, and he will receive $3,400 (6.8%) per year from the gift annuity. That is a higher percentage than he has been withdrawing, and it is guaranteed for life. George made a future charitable gift while sustaining and possibly enhancing his retirement security.
A transfer of IRA funds for a gift annuity or charitable remainder trust, unlike a transfer for an outright gift, can be exercised only in one tax year during a donor's lifetime and be only up to $50,000. |
