Conrad Teitell

Smart Philanthropy

Your clients can use up to $53,000 of their IRA's Required Minimum Distributions (RMDs) to make life-income charitable gifts.

The details:

• Charitable gift annuities (CGAs), charitable remainder unitrusts (CRUTs) and charitable remainder annuity trusts (CRATs) can be funded by transfers (rollovers) to qualified charities from their IRAs.
• Available to taxpayers 70½ or over.
• Qualified income beneficiaries: the IRA owner, the spouse or both.
• $53,000 maximum.
  • Caution—the fine print: a one-year only transfer. If a taxpayer rolls over a lesser amount—say $10,000—she can't rollover even one penny in future tax years. But, she can rollover the balance of $43,000 in the same year.

More rules:

• Minimum payout is five percent—all payouts by the life income plan are taxable as ordinary income.
• No income tax charitable deduction.
• Withdrawals up to $53,000 aren't taxable—even if it's a Required Minimum Distribution (RMD). Not being taxed is the equivalent of a charitable deduction. But remember, the income payments each year are taxable.
• All public charities (except Donor Advised Funds (DAFs) and Supporting Organizations) are qualified recipients.

The law allowing tax-free IRA direct transfers to charities of up to $105,000 annually (no life-income) isn't changed. This is the indexed for inflation amount for 2024.

Although the law allows donors to fund CRUTs and CRATs with up to $53,000, for life-income gifts, that low amount generally makes CRUTs and CRATs impractical. However, $53,000 (or less) makes transfers for charitable gift annuities attractive.