IRA transfers to Charitable Gift Annuities now possible!
For many years, the charitable community has sought legislation that would treat the transfer from an IRA to a life-income gift as a qualified charitable distribution (QCD). We are thrilled to report that the Consolidated Appropriations Act of 2023, which was recently passed by Congress and signed by the President, contains such a provision. This came about because legislation known as the SECURE 2.0 Act, which contains numerous provisions related to retirement plans, was included in the omnibus bill.
What is the “Legacy IRA” legislation?
Under certain circumstances, a donor who is 70 ½ or older can make a one-time tax-free Qualified Charitable Distribution (QCD) from their IRA in exchange for charitable gift annuity (CGA).
How does it work?
The Legacy IRA plan allows a tax-free QCD from an IRA account to establish a charitable gift annuity.
You must be 70 ½ or older to take advantage of this opportunity.
You can contribute up to $50,000, once during your lifetime in one tax year
To qualify, the QCD must go directly from your IRA custodian to Boston College.
No. This is a once-in-a-lifetime election, and can only occur in one tax year. You have one year in which to use this opportunity. There is no rollover or carry forward.
The Legacy IRA will count towards the annual QCD limit of $100,000.
(Note: As part of the SECURE Act 2.0, the $50,000 and $100,000 limits will be adjusted for inflation each year beginning in 2024.)
You must be at least age 70 ½ at the time you make a QCD contribution of any kind. If you include a non-donor spouse under 70 ½ as an income beneficiary, your gift will still qualify so long as the CGA payout amount is at least 5%.
Yes. Just like an outright gift of a QCD, a QCD to fund a life income plan satisfies your RMD dollar for dollar.
Secure 2.0 increases the age retirees must begin taking taxable withdrawals (RMD) to 73 in 2023 and 75 by 2033, up from the previous 72. It does not, however, increase the age an IRA owner can make a qualified charitable distribution. That age remains at 70 ½.
Yes, all QCD CGA payments are taxed as ordinary income.