Retirement Accounts

Gifts during a donor’s lifetime
The Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) became law on December 20, 2019. The Secure Act made major changes to the rules governing Required Minimum Dsitributions (RMD) from an IRA. If you reached the age of 70½ in 2019 the prior rule applies, and you must take your first RMD by April 1, 2020. If you reach age 70 ½ in 2020 or later you must take your first RMD by April 1 of the year after you reach 72.Donors aged 70 ½ or older are allowed to use the required minimum disbursement (RMD) from an IRA account to make a direct donation of up to $100,000 to a charity, tax-free. IRS tax information re: IRA contributions. While your client would not receive a charitable deduction for this type of gift, as the funds must go directly to a charity, your client would not have to claim it as income and would therefore not be taxed on the amount. After 9 years of this provision requiring yearly government renewal, it was made permanent as part of the Protecting Americans from Tax Hikes (PATH) Act in December of 2015. For more information on IRS restrictions related to this type of gift, click here.

Gifts of retirement accounts during a client’s lifetime example:

Gifts through a client’s estate distributions
Retirement funds paid to children upon a donor’s death can get hit with heavy income and estate taxes (sometimes up to 70%), however they are tax-free when passed to a charity.

By naming a charity as the beneficiary of a retirement plan, your client may give these heavily-taxed assets to charity, while leaving more favorably-taxed property to family.

 Gifts of retirement accounts through client’s estate example: