At the end of 2022, Congress passed the new budget law that included provisions from the “Secure Act 2.0.” The main goal of these new laws is to enhance retirement benefits, but there are also some interesting philanthropic implications.
Required Minimum Distribution (RMD) Age Increased
Beginning in 2023, retirees must begin taking taxable withdrawals from their retirement accounts at age 73 (up from 72), and by 2033, the minimum age will be 75.
Implications for Charity
The age at which retirees can begin taking qualified charitable distributions (QCDs) has not changed from age 70.5. This means there will be an increasingly large number of years when retirees may find it beneficial to make QCDs from their fund in order to minimize tax implications later on.
QCDs can be directed to any endowment at the Foundation and most Family Funds (excluding Donor Advised Funds). A family may want to direct their QCD to a custom Family Fund to build up the balance over a number of years. Or they could direct the money to their favorite parish or school’s endowment.
Annual Limit on Gifts from IRAs Adjusted for Inflation
Historically, retirees could only donate $100,000 annually from their IRA directly to charity. This number will now be adjusted for inflation beginning in 2024.
Implications for Charity
Retirees who want to minimize negative tax implications of their retirement assets will now be able to donate more of this money to charity each year. Most funds at the Foundation (excluding Donor Advised Funds) are eligible for QCDs.
IRA Can Fund a Life-Income Gift
Retirees over 70.5 can make a one-time gift to fund a life-income gift (like a charitable gift annuity [CGA] or charitable remainder trust [CRT]) of up to $50,000.
Implications for Charity
RMDs can now be used for gifts that provide your client with payments to boost their retirement income. These gifts can be attractive to donors who are looking for stable income in their retirement and also want to support a charity they love. If your client is interested in a CGA or CRT, we’re happy to discuss the possibilities with them.
If you have a client who is interested in creating a custom endowed or non-endowed fund, utilizing the QCD can be a great way to get that fund started and grow it over a number of years. If you’d like to discuss ideas for a specific client or general options, please reach out.