Plan Your Giving Beyond Retirement: Leverage Tax-Free Assets From Your IRA
So often, the broader conversation on financial planning is focused on a fixed goal on the horizon: retirement. However, it’s just as important to look beyond retirement—not only to anticipate our own comforts and needs, but to ensure financial security for our loved ones, and the legacy we wish to establish through our charitable giving.
One option to consider is opening a Donor Advised Fund to manage your giving: these funds allow you to maximize your tax deductions and give at your own pace, while offering the potential to grow your assets tax-free. Many fund holders also involve their families—especially their children and grandchildren—in deciding where to give from their fund, using their fund as a tool to carry on a tradition of giving as a family. Whether you give through a fund or through individual contributions, one resource you may not have considered leveraging to support your charitable impact is your IRA.
Individual Retirement Accounts (IRAs) are defined contribution plans such as 401(k)s, pension plans, and annuities that come with a wide range of flexible benefits. Once you reach the age of 70 ½, you are required to take money out of your IRA. If you choose to keep these funds in a personal account, that IRA distribution will be taxed.
Alternatively, you can make a tax-free Qualified Charitable Distribution (QCD) up to $100,000 annually per taxpayer from your IRA to one or more charities. You can choose to designate a portion or all of your IRA as a charitable donation—and this can include making a donation or moving funds from your IRA into an existing or new Donor Advised Fund or Field of Interest Fund. QCDs are a great way to fulfill required minimum distributions from your IRA without incurring the typical income tax liability that come with them. Our donor services team can help you explore your QCD options, from making a donation to seeing what fund type may be right for you. QCDs also give you the opportunity to build a legacy that reaches far beyond your loved ones, impacting communities and causes close to your heart for years to come.
Putting your IRA funds into a DAF via Qualified Charitable Distributions not only eases up time-sensitive pressure, but also allows you to maximize your assets for your charitable giving.
If you already have an IRA, you probably know that you can designate multiple beneficiaries to inherit assets from your account when you pass away, with the flexibility to change those IRA beneficiaries as often as you like across different accounts. If you intend to leave money to charity upon your death, you may want to consider designating funds from your IRA to your Donor Advised Fund—this can alleviate the inheritance tax burden for your family as it will reduce the overall portion of your estate that will be subject to federal estate taxes. If you name family members as trustees on your Donor Advised Fund, they can then carry on your legacy by giving from the fund to the causes your family holds dear.
With a great commitment to Brooklyn as our guide, we can partner with you to maximize your charitable giving today and into the future, whether by lending our long-standing local knowledge and deep community ties to help you identify what causes and organizations you would like to champion, or by working to find the right fund to support your family’s giving goals Our team is here to help you build a long lasting and impactful legacy for years to come.