Make a Difference While Meeting Your RMD Requirements

As individuals begin taking Required Minimum Distributions from their retirement accounts, many seek ways to use their financial resources efficiently while giving back to causes they care about. Qualified Charitable Distributions allow one to meet Required Minimum Distribution requirements while supporting charitable organizations tax-efficiently. Donating directly from an IRA means individuals aged 70½ or older can reduce their taxable income and make a meaningful impact, ensuring their financial goals and charitable values align.  

How RMDs Can Support Charitable Giving  

As individuals approach retirement and begin taking Required Minimum Distributions (RMDs) from their tax-deferred accounts, many are looking for ways to reduce the tax burden these distributions can create. For those committed to philanthropy, a Qualified Charitable Distribution (QCD) offers a powerful tool to fulfill RMD requirements while supporting causes that matter. A QCD allows individuals aged 70½ or older to donate directly from their IRA to a qualified charity. The benefit is twofold: the donation counts toward the annual RMD but is excluded from taxable income, allowing retirees to reduce their tax liability while making a meaningful charitable impact.  

However, not all charities qualify for QCDs. To ensure your donation meets IRS requirements, it must go to a 501(c)(3) public charity, such as nonprofits that support community services, education, or religious organizations. It is important to note that private foundations, donor-advised funds, and specific supporting organizations are not eligible for QCDs. Confirming that the charity is qualified is essential by checking the organization’s tax-exempt status through its website, calling them directly, or using the IRS’s online search tool for tax-exempt organizations.  

Ways to Make RMD Gifts to Charities  

There are flexible options for using your RMD to support charitable organizations. Some retirees prefer to make a lump-sum gift, where the entire RMD is donated in one annual contribution to a single charity. This straightforward approach allows you to meet your RMD requirement while significantly impacting the charity of your choice. For those who focus on one organization, this method simplifies the giving process and provides the charity with substantial support in one instance.  

On the other hand, some prefer to make frequent or recurring gifts throughout the year. By dividing your RMD into smaller donations, you can support multiple charities or provide ongoing support to one organization over time. This method offers greater flexibility and can align better with your cash flow or financial planning. Both lump-sum and recurring gifts offer the same tax benefits, allowing you to structure your charitable giving in a way that works best for you and your financial goals.  

Integrating Charitable Giving into Your Estate Planning  

Using RMDs for charitable contributions allows retirees to reduce taxable income and plays a crucial role in broader estate planning. Charitable giving through QCDs can help lower estate tax liabilities by reducing the size of your taxable estate, ensuring that more of your wealth goes to the causes you care about instead of taxes. Furthermore, using your RMDs for charity can align with your long-term financial goals by creating a lasting philanthropic legacy. Whether through a lump-sum donation to establish an endowment or ongoing contributions to support annual programs, these gifts can ensure that the organizations you care about will benefit from your generosity for years to come.  

At Legacy Private Trust Company, we are committed to helping you navigate the complexities of retirement distributions and charitable giving. Our experienced advisors can help you explore how QCDs fit into your estate plan, allowing you to meet your financial obligations while supporting the causes that reflect your values.  

Aligning Philanthropy with Financial Strategy  

At Legacy Private Trust Company, we believe charitable giving is a powerful way to leave a lasting legacy. Using your RMD through a Qualified Charitable Distribution (QCD) allows you to meet IRS requirements while supporting the most important causes. Whether your focus is local community groups or global initiatives, QCDs offer a tax-efficient way to make a meaningful impact.  

Contact Legacy Private Trust Company today to learn how we can help you incorporate charitable giving into your retirement plan 

If you are a Legacy client and have questions, please do not hesitate to contact your Legacy advisor. If you are not a Legacy client and are interested in learning more about our approach to personalized wealth management, please contact us at 920.967.5020 or connect@lptrust.com.

This newsletter is provided for informational purposes only.
It is not intended as legal, accounting, or financial planning advice.

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