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IRA Charitable Rollover

For taxpayers who have investments in pretax retirement accounts (such as IRAs, 401(k)s, IRA annuities), the IRS generally requires that taxable distributions be taken from these accounts on an annual basis once the owner reaches the age of 73 (increased from 70.5 to 72 in 2020 with the passing of the SECURE Act, and again in 2022 to the current age of 73 with the passing of SECURE Act 2.0). These are called Required Minimum Distributions or “RMDs.” They begin as a relatively small percentage of all pretax assets; however, the annual percentage is based on life expectancy, so the required distribution tends to increase gradually over time. Depending on the total amount of assets held in pretax retirement accounts, these RMDs can become very large over time and create a higher tax burden when combined with other retirement income streams, particularly because the distributions are taxable as ordinary income in the year received.

For IRA owners who are charitably-inclined and who don’t require these distributions for cash flow, the IRA Charitable Rollover (also known as a Qualified Charitable Distribution or “QCD”) can be a very effective strategy.  IRA Charitable Rollovers are a special provision in the tax code that allows an IRA owner to make a tax-free gift of up to $100,000 directly from the taxpayer’s IRA to an eligible charity (or charities) of their choosing. The maximum can be reduced, however, if the individual makes deductible IRA contributions beyond age 70.5.

New in 2023: Historically, Qualified Charitable Distributions have not been permitted to be made directly from a retirement account to a charitable trust. Under the new SECURE Act 2.0, a one-time QCD of $50,000 to certain types of charitable trusts may be allowed, subject to certain restrictions and requirements. Read more – Download PDF Now >>

As always, we recommend you consult your trusted financial adviser.  To learn more about the IRA Charitable Rollover, the potential advantages of charitable estate planning, and donor recognition accorded through membership in The Legacy Society, please contact Chris Rollins, CFRE at (856) 552-3287 or CRollins@SamaritanNJ.org. Samaritan Healthcare & Hospice, Inc. is a 501(c)(3), not-for-profit organization (EIN: 22-2344036); headquartered at 3906 Church Road, Mount Laurel, NJ 08054.

 This article was provided by Mike Cona and Jim Ewing, who are Managing Directors and Partners of  Clarity Point Financial Partners, a HighTower company.  Jim is a member of Samaritan’s Planned Giving Committee, a volunteer group of the region’s leading financial professionals, lending their time and expertise to guide our charitable estate planning efforts.