Charitable IRA Rollover
What is a charitable IRA rollover?
The charitable IRA rollover, or qualified charitable distribution (QCD), is a special provision allowing certain donors to exclude from taxable income – and count toward their required minimum distribution – certain transfers of Individual Retirement Account (IRA) assets that are made directly to public charities, including the Radford University Foundation, Inc.
How does this help me?
A charitable IRA rollover makes it easier to use IRA assets, during lifetime, to make charitable gifts, including annual pledges.
What will the rules be for the IRA charitable IRA rollover?
A gift that qualifies, technically termed a “qualified charitable distribution,” must be:
- Made by a donor age 70 1/2 or older on the day of the gift.
- The donor transfers up to $100,000 directly from the donor’s IRA to one or more qualified charities. This opportunity applies only to IRAs and not to other types of retirement plans.
- Transferred from a traditional or Roth IRA directly to a permissible public charity, such as the Radford University Foundation Inc.
- The donor pays no income tax on the gift. The transfer generates neither taxable income nor a tax deduction, so donors benefit even if they do not itemize their deductions.
- The gift can satisfy all or part of the required minimum distribution for the year.
- The gift may not be used to fund a gift annuity, charitable remainder trust, donor advised fund or private foundation.
- The donor does not receive any goods or services in return for the rollover gift in order to qualify for tax-free treatment.
How to Give from an IRA
- Contact your IRA Custodian.
- Sign application to give amount or percentage to Radford University Foundation, Inc.
- IRA Custodian makes transfer.
- If for a specific purpose, contact Bruce Cunningham or a development officer in University Advancement.
- Rollover your qualified Retirement Plan to IRA, then to QCD.
What is the timeline to complete this?
- The charitable rollover must be completed by December 31 of the rollover year.
- This is consistent with the requirement to take the RMD during the calendar year.
- Because some IRA Custodians can take up to two to three weeks to process the rollover, it is important to start an IRA rollover by the first week of December.
Is there a limit on the amount that can be given?
Yes, there is a limit. An individual taxpayer's total charitable IRA rollover gifts cannot exceed $100,000 per tax year. If both husband and wife have substantial IRA accounts, then up to $200,000 per year may qualify for IRA rollovers.
What about the required minimum distribution?
If you have not already taken your required minimum distribution in a given year, a qualifying rollover gift can count toward satisfying this requirement.
Is an income tax deduction also available?
No. The gift would be excluded from income, so providing a deduction in addition to that exclusion would create an inappropriate double tax benefit.
Why are Roth IRAs included? Aren't withdrawals from a Roth IRA tax-free?
Withdrawals from a Roth IRA may be tax-free only if the account has been open for longer than five years or if certain other conditions apply. Otherwise, withdrawals are taxed as if they came from a traditional IRA. Therefore, certain Roth IRAs could benefit from a charitable IRA rollover.
Can other retirement plans, such as 401(k) and 403(b) accounts, be used?
No. However, it may be possible to make a tax-free transfer from such other accounts to an IRA, from which a charitable rollover can then be made.
Can a gift be made to any charity?
No. Excluded are:
- Donor advised funds
- Supporting organizations
- Private foundations
Who can benefit from using the charitable IRA rollover to make a gift?
- Persons with significant assets in an IRA
- Persons making gifts that are large, relative to their income. (Because a charitable rollover is not included in taxable income, it does not count against the usual percentage limitations on using charitable deductions.)
- Persons having so few deductions that they choose not to itemize
Can a rollover gift be used to fund a charitable remainder trust or charitable gift annuity?
No. The donor can receive no benefits in return for the gift. This includes life income plan payments.
Can a rollover gift be used to maintain or improve a donor's standings?
No. While a charitable IRA rollover gift can be made to Athletics, the donor is not permitted to receive any priorities or other privileges in exchange for the gift. Otherwise, the gift will not be a qualified charitable IRA rollover.
Are there any benefits that a donor can receive?
The only permissible benefits from a charitable IRA rollover gift are those that would not reduce the tax deduction for which the donor would have otherwise qualified. At Radford University, a charitable IRA rollover gift is allowed to count toward naming opportunities.
What if a withdrawal does not meet the requirements of a charitable IRA rollover?
It simply will be included in taxable income as other IRA withdrawals currently are.
Is the charitable IRA rollover right for everyone?
While this is a great option, other types of gifts may provide donors with more tax benefits. As with any gift planning question, donors should consult their tax professionals for specific advice.
Can I still make a gift with an IRA beneficiary designation?
Absolutely! Whether or not you choose to make a charitable IRA rollover gift, you can still designate the Radford University Foundation Inc. as a beneficiary to receive IRA assets after your lifetime. The lifetime charitable IRA rollover is simply another option for donors who would like to see their philanthropy at work now.
Contact Bruce Cunningham at Radford University Office by phone at 540-831-2009 or 540-230-6056 (cell).
For information on how to transfer your gift to Radford University Foundation, Inc., please click here.
As in all cases, consult your own advisors who must assume final responsibility in advising you whether or not this gift is appropriate in your own unique circumstance.