Julie Jason: Lifelong income from a QCD?

Lifelong income from a QCD?

Did you know that a qualified charitable distribution (QCD) can not only limit your tax liability for a required minimum distribution, but it also can provide a life income plan?

QCDs, which came into existence as part of the Pension Protection Act of 2006, provide a way for IRA owners who are charitably inclined to use part or all of their required minimum distributions (RMDs) — up to $100,000 per year — to avoid being taxed on the RMD when donating to a qualified charity. You can see if a charity qualifies by using the IRS Tax Exempt Organization Search Tool ( tinyurl.com/497um8xp).

Some guidelines: The QCD is considered a nontaxable IRA withdrawal. The IRA owner must be at least 70 ½ years old, which is younger than RMD starting age (currently age 73). The QCD must be paid directly from an IRA to a qualified charity. For more details, see IRS Publication 590-B ( tinyurl.com/yc6tx8dh).

Now, thanks to SECURE Act 2.0, which became law in December 2022 as part of the 2023 Consolidated Appropriations Act, the charity receiving the QCD donation can pay you lifelong income. See “One-time Election for Qualified Charitable Distribution to Split-interest Entity,” Section 307 of SECURE Act 2.0 ( tinyurl.com/ycyck5bs).

A “split-interest entity” is defined in SECURE Act 2.0 as one of three things: a charitable remainder annuity trust, a charitable remainder unitrust or a charitable gift annuity. All three have the same requirement: they must be “funded exclusively by qualified charitable contributions.”

Let’s do an example first, then we’ll come back for details and restrictions.

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from News https://www.ctpost.com/news/article/julie-jason-lifelong-income-from-a-qcd-18133183.php