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Ask Gordon

Gordon L. Nelson, CPA, CFP® is a planned giving specialist. Want to get your questions answered? Write him or call him at 435.213.9986.

November 2023

Dear Gordon,

I’ve diligently saved in my IRA and 401k throughout my career. I’ve recently heard that there are strategic ways to leverage these retirement funds for charitable contributions while also saving on taxes. Could you shed some light on how this works?

-Eager Giver
Sarasota, FL

Dear Eager Giver

It’s heartening to see individuals like you wanting to make a meaningful impact with their savings. Leveraging your retirement funds for charitable donations can indeed be tax-efficient. Let’s dive into some key details.

Tax Insights: Typically, distributions from traditional IRAs, 401ks, and other qualified retirement accounts are taxable. However, there’s a silver lining: when these funds are directed to a 501c3 charity, the taxation is bypassed.

Strategies to Consider:

  1. QCDs: For those aged 70 ½ and above, a qualified charitable distribution (QCD) is a valuable tool. You can direct up to $100,000 straight from your IRA to a charity, tax-free. If you’ve reached age 73 and have mandatory annual required minimum distributions (RMDs) from your IRA, a QCD can satisfy this requirement. So, if an RMD is on your horizon in 2023, consider channeling it toward the betterment of wild Florida.
  2. IRA Rollover to Charitable Gift Annuity: A rather novel avenue, but if you’re 70 ½ or older, you can execute a one-time transfer of up to $50,000 from your IRA to a charitable gift annuity. This gives you the advantage of fixed lifetime payments, possibly extending to your spouse. The remainder then helps the Foundation’s mission.
  3. Beneficiary Designations: Any residual balance in your retirement account after your lifetime is termed by the IRS as “income in respect of a decedent.” If directed to an individual, it’s taxable. But if you set a 501c3 charity as a beneficiary, this tax is nullified. This simple act can have profound impacts.

If these options pique your interest or if you have further queries, I invite you to schedule a short, confidential chat with me. It’d be my pleasure to guide you.

Warm regards,

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