Qualified Charitable Distributions from Individual Retirement Accounts
Individuals may make a qualified charitable distribution (QCD) from their individual retirement accounts (IRAs) directly to CJR beginning at age 70½. The amount of the QCD is excluded from a donor’s adjusted gross income, and thus, is not subject to income tax. Donors do not receive a charitable deduction for income tax purposes; however, those aged 72 and older may use QCDs to satisfy some or all of their required minimum distributions up to $100,000 annually.
Hedy Barton, CFRE
Director of Development
CJR / CJR Fund, Inc.
550 Goshen Road, P.O. Box 161,
Litchfield, CT 06759
Telephone: (860) 567-9423, ext. 1252
Gifts from Qualified Retirement Savings
Designating CJR as the beneficiary of retirement assets is one of the smartest ways for donors to make a gift and while avoiding multiple levels of taxation. Qualified retirement savings are generally subject to federal income tax as they are withdrawn from the plan. Failure to take the required minimum distribution after age 72 results in a 50% tax on the undistributed amount. At death, any remaining account balance is included in the calculation of the gross estate and may be subject to both income and estate taxes. Finally, a generation-skipping tax may apply to substantial account balances that pass to grandchildren or to other remote generations. These taxes can consume a significant portion of the retirement assets.
Careful planning for the disposition of retirement plan assets can help to avoid undesirable tax costs. Naming CJR as a beneficiary of a retirement plan can reduce the size of a taxable estate and avoid income taxation on those funds. In certain situations, a charitable gift of a retirement account can minimize a donor’s overall tax liability and increase the amounts passing to heirs.
All prospective donors should seek appropriate counsel in matters related to giving through IRAs and qualified retirement savings.