Professional Spotlight
Alex Hengel, a Principal at CLA, a national professional services firm providing audit, tax, consulting, and wealth advisory services, and religious organizations segment leader within CLA’s nonprofit industry practice, shares why Qualified Charitable Distributions can be a tax efficient way for many donors to give directly from an IRA rather than first taking a withdrawal and then making a charitable gift. Alex and his wife, Janelle, along with their children, Adelynn and Fletcher, have deep roots at Saint Andrew in Elk River, where members of their family have been parishioners for several generations.
Qualified Charitable Distributions
Qualified Charitable Distributions (QCDs) have become an increasingly popular charitable giving strategy in recent years. As more Americans reach retirement age and look for tax-wise ways to support the causes they care about, QCDs have gained attention for their simplicity and flexibility. Recent legislation has also increased awareness of QCDs, making them an important charitable planning option for many faith-filled donors who wish to support their parish, Catholic school, ministry, or favorite charity. With growing interest in this giving option, we thought we would share some of the most frequently asked questions about QCDs in this month’s memo.
What is a Qualified Charitable Distribution (QCD)?
A QCD is a direct transfer from an Individual Retirement Account (IRA) to a qualified charitable organization. It allows donors to support the causes they care about using retirement assets.
Who can make a QCD?
Individuals who are at least 70½ years old at the time of the gift may be eligible to make a QCD from an IRA.
How does a QCD work?
The distribution must be made directly from the IRA custodian to the charitable organization. Funds withdrawn personally and later donated generally do not qualify as a QCD.
What are the benefits of making a QCD?
A QCD allows donors to make a charitable gift directly from their IRA while generally excluding the distribution from taxable income. For those subject to a Required Minimum Distribution (RMD), a QCD can also satisfy all or part of that requirement.
Who can receive a QCD?
Eligible recipients generally include most qualified 501(c)(3) charitable organizations, including your parish, Catholic schools, the Bishop’s Annual Appeal, Catholic Charities, the Catholic Foundation, and many other worthwhile philanthropic causes.
What are the limitations of a QCD?
QCDs cannot be used to fund donor-advised funds or private foundations. They also cannot be used for event tickets, dinners, sponsorship packages, auction purchases, or other benefits that provide value to the donor.
Why do many donors choose a QCD?
For charitably minded retirees, a QCD is a simple and meaningful way to support the ministries and organizations that have shaped their faith and values. It allows donors to make a lasting impact today while helping ensure those ministries continue to serve future generations.
Since the amount is transferred directly to the charity, it is never included in income and does not impact various calculations on income tax returns. It will not lead to higher Medicare premiums as some taxpayers with high income face.
Also, retirement accounts are not stepped-up on death and therefore the tax liability passes to the beneficiary, subjecting it to income taxes in their hands and potentially state and federal estate taxes. This makes QCDs more attractive as an estate planning tool.
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Looking for more information? Please reach out to David or Chris at the Catholic Foundation.
David Eickhoff: Executive Director
Email: deickhoff@catholicfoundation.info
Phone: 320.258.7657
Chris Backes: Planned Giving Coordinator
Email: cbackes@catholicfoundation.info
Phone: 320.257.2139