As part of the 2023 Omnibus Appropriations bill and beginning Jan. 1, 2023, the Secure 2.0 Act raised the age for required minimum distributions to age 73 (formerly 72) for individuals born between 1951 and 1959, and age 75 for those born in 1960 or later.
How can it benefit you?
The Secure 2.0 Act created a new charitable rollover planning opportunity in which qualified charitable distributions (QCDs) now include a narrowly defined, one-time distribution to create life income plans, such as charitable gift annuities (CGAs).
In the case of a CGA, this is a one-time maximum transfer of $53,000 to create a CGA with a charity. It can only be done once in the IRA owner’s lifetime. A CGA made using the QCD election must be funded exclusively with the QCD election.
Key Points for CGAs:
- This new QCD to life income plan opportunity began in 2023 and is available to those aged 70 ½ years and older.
- The new QCD to a life income plan opportunity does not qualify for an income tax charitable deduction. However, the CGA that receives the QCD must otherwise qualify for an income tax charitable deduction as required by current law.
- The transfer is one-time only, up to $53,000 in a single year. So, a donor can transfer amounts less than $53,000 in a year, then add more in the same year, but no additional transfers are available in future years even if the balance is less than $53,000.
- This $53,000 counts toward the overall $105,000 QCD maximum annual limit.
- All payments by the CGA funded by the QCD must be fully taxable at the recipient’s ordinary income tax rate. There is no possibility of tax-free payments or income taxed at the capital gain tax rate from the CGA.
- Spouses can each contribute up to $53,000 from their respective IRAs to one joint-life CGA. So, the total for a CGA will be $106,000 with $53,000 from each spouse.
- Only the IRA owner and/or his/her spouse may receive the payments from the CGA funded with this QCD. No payments are allowed to children or grandchildren.
- A CGA funded by the new QCD must have a payout rate of at least 5%.
Learn how you can use this opportunity to plan a gift supporting your Texas A&M passions by contacting our team at plannedgiving@txamfoundation.com.
*This is general information and should only be referenced for general advice on this legislation. Please seek professional guidance from your advisors to understand the best plan for your individual needs.
