Qualified Charitable Distributions (QCD)
QCDs provide a way to help charities while you’re still alive and lowering taxes on required minimum distributions from your IRA. A QCD is a direct transfer from your IRA to qualified charities. You can make a QCD as early as age 70½, but when you reach the age at which you must start required minimum distributions (RMDs)—currently 73—the charitable distribution will count toward the RMD.Donor-Advised Funds
These funds, offered by most major financial-services firms, allow you to donate cash, securities or other assets to an investment account and decide later how to distribute the funds to charity. Even if you don’t itemize deductions on your tax return, donating an appreciated asset to a donor-advised fund provides a tax benefit because you don’t have to pay taxes on capital gains you’ve accumulated.Some major donor-advised funds, such as Schwab Charitable and Fidelity Charitable, have no minimum contribution requirement. Most donor-advised funds offer a broad range of investment portfolios, allowing your contributions to compound and grow until you distribute the money to charity.
While cash and appreciated securities are the most common contributions to donor-advised funds, many will accept non-cash assets, such as cryptocurrency, real estate, art and collectibles, life insurance and restricted stock.
Charitable Gift Annuities
A charitable gift annuity is a contract between you and a charity. You can donate cash, securities, or other assets to the charity and get a charitable tax deduction up front. The institution invests the money and returns some of it to you—and up to one beneficiary, such as a family member, if you wish—in fixed monthly payments for the rest of your life. Any funds remaining after you die will go to the charity.
Retirees who are 70½ or older have the option of making a one-time donation of up to $50,000 from their traditional individual retirement accounts (IRAs) to a charitable gift annuity. In that case, the donation isn’t tax-deductible, but the distribution will be excluded from taxable income. If you’ve reached the age at which you’re required to take minimum distributions from your IRA, the contribution counts toward that RMD, which would otherwise be taxed as ordinary income.
Because of the significant financial obligations required, charitable gift annuities are typically offered by sizable, well-funded organizations—colleges and universities, for example, and large national charities, such as the American Cancer Society.
As is the case with donor-advised funds, some charitable gift annuities can accept non-cash assets, such as appreciated securities or even real estate, says Johnne Syverson, vice president of gift annuity services for the National Gift Annuity Foundation.
