Taking Advantage of the Time In-Between

by | May 25, 2022 | charitable estate planning, charitable giving, estate and tax planning

While the original SECURE Act raised the age at which we must take Required Minimum Distributions out of IRAs and other qualified retirement plans from 70 ½ to 72 (beginning in 2020), SECURE 2.0, which has passed the House and is now headed for Senate deliberation, would go much further, increasing the RMD age to 73 in 2023, 74 in 2030, and 75 in 2033.

Whatever the final mandatory RMD age number, age 70 ½ remains an important milestone for the charitably minded, and a topic of importance in the estate and gift planning.conversations we have with our Geyer Law clients.

QCDs explained:
Qualified Charitable Distributions (which Congress made a permanent rule in 2015) of up to $100,000 may be made by anyone over 70 ½. That hasn’t changed, regardless of the change in timing for Required Minimum Distributions. Qualified Charitable Distributions allow seniors the opportunity to make a tax-free withdrawal out of an IRA payable directly to one or more qualified 501 (C)(3) charities. The funds go to the charities income tax free, and the distribution from the IRA is not income to the participant so no income tax is owed. Since the funds are never distributed to the participant, there is no charitable deduction; the participant instead escapes income tax on the distribution given to charity.

Why now might be an especially good time for QCDs:

  • Taking money out of your IRA now, before you’re obligated to do so reduces the account balance so that future (taxable) mandatory withdrawals are reduced.
  • In the year of the gift, you reduce your adjusted gross income.
  • With the recent downturn in the investment markets, many taxpayers are converting their traditional IRAs to Roth IRAs. A Qualified Charitable Distribution further reduces the tax burden for the Roth conversion.
  • QCDs are an exclusion from income, and reducing adjusted gross income can reduce or eliminate the taxation of Social Security or other income, Investopedia explains.

* While we offer no tax advice at Geyer Law, instead working in cooperation with our clients’ tax advisors, charitable planning is an important aspect of the estate planning process.

QCDs are one way to take advantage of the “time in-between”!

– by Jude Byanski, Attorney at Rebecca W. Geyer & Associates

While the original SECURE Act raised the age at which we must take Required Minimum Distributions out of IRAs and other qualified retirement plans from 70 ½ to 72 (beginning in 2020), SECURE 2.0, which has passed the House and is now headed for Senate deliberation, would go much further, increasing the RMD age to 73 in 2023, 74 in 2030, and 75 in 2033.
https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/congress-considers-a-new-round-of-retirement-legislation.aspx#:~:text=SECURE%20Act%202.0%20increases%20the,to%2075%20starting%20in%202032.&text=The%20original%20SECURE%20Act%20expanded,’%20401(k)%20plan.

Whatever the final mandatory RMD age number, age 70 ½ remains an important milestone for the charitably minded, and a topic of importance in the estate and gift planning.conversations we have with our Geyer Law clients.
https://www.rgeyerlaw.com/estate-planning/

QCDs explained:
Qualified Charitable Distributions (which Congress made a permanent rule in 2015) of up to $100,000 may be made by anyone over 70 ½. That hasn’t changed, regardless of the change in timing for Required Minimum Distributions. Qualified Charitable Distributions allow seniors the opportunity to make a tax-free withdrawal out of an IRA payable directly to one or more qualified 501 (C)(3) charities. The funds go to the charities income tax free, and the distribution from the IRA is not income to the participant so no income tax is owed. Since the funds are never distributed to the participant, there is no charitable deduction; the participant instead escapes income tax on the distribution given to charity.

Why now might be an especially good time for QCDs:

Taking money out of your IRA now, before you’re obligated to do so reduces the account balance so that future (taxable) mandatory withdrawals are reduced.

In the year of the gift, you reduce your adjusted gross income.

With the recent downturn in the investment markets, many taxpayers are converting their traditional IRAs to Roth IRAs. A Qualified Charitable Distribution further reduces the tax burden for the Roth conversion.

QCDs are an exclusion from income, and reducing adjusted gross income can reduce or eliminate the taxation of Social Security or other income, Investopedia explains..
https://www.investopedia.com/articles/financial-advisors/032116/how-use-qcd-rule-reduce-your-taxes.asp

* While we offer no tax advice at Geyer Law, instead working in cooperation with our clients’ tax advisors, charitable planning is an important aspect of the estate planning process.

QCDs are one way to take advantage of the “time in-between”!

– by Jude Byanski, Attorney at Rebecca W. Geyer & Associates