Retirement plans offer giving opportunities

The Community Foundation of Jackson County is seeing more charitable gifts made through donors’ retirement funds, whether they be from IRAs or 401(k) plans. They might be a good giving tool for you, too.

The Setting Every Community Up for Retirement Enhancement Act, also called the SECURE Act, was signed into law in 2019 and amended this spring.

The act allows retirees to delay taking required minimum distributions, or RMDs, until age 72 for participants in 401(k) programs and other defined-contribution plans, defined-benefit pension plans, and for individual retirement account holders, according to the Society for Human Resource Management. Required minimum distributions are the minimum amount participants must withdraw from their retirement accounts each year, set by actuarial tables.

This change – RMDs were formerly required to start at age 70½ — is primarily a result of many Americans working and living longer.

However, that age 70½ number is still effective for folks who might use another part of the tax code to make a qualified charitable distribution, also known as a QCD. A qualified charitable donation can be made from an IRA by anyone age 70 ½ as a tax-free withdrawal provided that the withdrawal goes directly to charity, that is a 501c3 such as the Foundation.

The annual limit for a QCD is $100,000 per person.

One potential advantage of making a charitable gift through a QCD is that the money is withdrawn tax-free from a donor’s IRA. That means it is an exclusion from income, reducing the donor’s adjusted gross income for that year in which the gift is made.

With changes in the U.S. tax code in December 2017, fewer people are using the standard deduction because that floor was pushed higher. That can make use of a QCD more enticing or more valuable for donors.

Making a QCD before age 72 —that is ahead of required minimum distributions – can lead to lower IRA account balances and therefore reduced required distributions once you hit age 72.

Again, key to making a qualified charitable deduction is that the withdrawal must go directly to the qualified charity.

Unfortunately, IRA charitable rollover gifts still cannot be made to donor-advised funds. That’s a change that we and other of our partners in philanthropy will continue to work on in upcoming sessions of Congress. You can, however, continue to make rollover gifts to support your favorite charities, your favorite causes or to the whole community with gifts to other types of funds administered through the Foundation, including community funds, designated funds and scholarship funds.

The staff at the foundation is always ready to work with donors and their financial advisors on how best to make charitable gifts to help meet their philanthropic needs, how best to give back, how best to pay it forward, how best to make a difference. You can call me at 812-523-4483, or simply pop into our office at 107 Community Drive, Seymour. I’d love to talk with you about how you can best meet your giving goals.

Davis is president and chief executive officer of the Community Foundation of Jackson County. The foundation is a nonprofit public charity established in 1992 to serve donors, award grants and provide leadership to improve Jackson County forever. The foundation administers nearly 300 funds and more than $17 million in assets. Send comments to [email protected].