Donor Advised Funds and Qualified Charitable Distributions are two ways that you can maximize your philanthropic impact, while benefiting from tax advantages that may help you in your retirement planning process.
If you are someone who is thinking about their retirement planning needs and has ever thought and of any (or maybe ALL) of the following:
Then setting up a DAF or QCD may be of interest to you - neither of these are REQUIRED to be part of your retirement planning process, but as your concerns and/or lifestyles change in retirement, you might be motivated to make some changes to your retirement plan and it is always good to know that this is an option.
You can contribute to a donor advised fund with a wide range of financial assets outside of just cash, from stocks, bonds, company stock, and even life insurance. You can find a larger list here.
While many IRAs are eligible for QCDs—Traditional, Rollover, Inherited, SEP (inactive plans only), and SIMPLE (inactive plans only)* —there are requirements:
You must be of RMD age or older to be eligible to make a QCD.
QCDs are limited to the amount that would otherwise be taxed as ordinary income. This excludes non-deductible contributions.
The maximum annual amount that can qualify for a QCD is $100,000. This applies to the sum of QCDs made to one or more charities in a calendar year. (If, however, you file taxes jointly, your spouse can also make a QCD from his or her own IRA within the same tax year for up to $100,000.)
For a QCD to count towards your current year's RMD, the funds must come out of your IRA by your RMD deadline, generally December 31.
Any amount donated above your RMD does not count toward satisfying a future year's RMD.
Funds distributed directly to you, the IRA owner, and which you then give to charity do not qualify as a QCD.
Under certain circumstances, a QCD may be made from a Roth IRA. Roth IRAs are not subject to RMDs during your lifetime, and distributions are generally tax-free. Consult a tax advisor to determine if making a QCD from a Roth is appropriate for your situation. (1)
The charity must be a 501(c)(3) organization, eligible to receive tax-deductible contributions.
Contact your financial advisor and your accountant, and tell them you are interested in creating a donor advised fund or converting an RMD to a Qualified Charitable Distribution. Make sure you communicate with both of them in a direct manner so they can make sure that this process is in your best interest.
Have a list of questions around your finances? Thinking about your retirement situation?
Use the calendar below to schedule a 15 minute complimentary introductory call directly with either Sam, John, or Ryan. We'll use this time to get to know you and your needs.
Our 365 Retirement Planning process is designed to create a personal relationship with our clients, taking the time to truly understand their unique personal and financial situation. Just as no two people are alike, we believe no two retirement plans should be, either.
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