Creating a Charitable Gift Annuity With an IRA Supports Charitable Organizations and Boosts Retirement Income

In January 2023, a new federal law went into effect that transforms the way retirees may make charitable donations to not-for-profit organizations.?

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Individuals who are age 70 ? years or older may now use their individual retirement account (IRA) to financially support charitable beneficiary organizations and increase their retirement income by using their IRA to fund a charitable gift annuity…the gift that pays the donor.

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The new law enables individuals to fund a gift annuity with a one-time, tax-free election of up to $50,000 coming from an IRA.

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Key benefits to donors:

• ?Avoid the tax burden that results from withdrawing from an IRA
• ?If a required minimum distribution (RMD) must be withdrawn from an IRA, all or part of the RMD may be used to satisfy the obligation for the year
• The individual – and the individual’s spouse, if chosen – will receive steady, consistent income annually for life in the form of reliable payments
• The amount of the consistent annual payments is fixed regardless of fluctuations in the stock market, interest rates or inflation
• After lifetime, the remaining balance becomes a legacy gift to one or more selected charitable beneficiary organizations

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Currently, an additional benefit is that gift annuity payout rates are higher than they have been in more than 10 years.

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For example, “Gregory,” age 75, has been donating to charitable organizations by making qualified charitable distributions from his IRA since the age of 70 ?. He wants to increase his level of giving but is concerned about his own retirement income.?Now, with the new law, he may make a one-time election to transfer up to $50,000 directly from his IRA to a charitable gift annuity with no tax obligation or penalty.?He receives annual payments of $3,300 for the rest of his life, reflecting a payout rate of 6.6%, to help support him during his retirements years. Upon his passing, Gregory will leave the balance of the funds held in the charitable gift annuity to his favorite charitable organizations as a legacy gift without having to modify his will or trust.

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For more information about using an IRA to create a charitable gift annuity, or more broadly to create a qualified charitable distribution to an endowed fund in which a donor may contribute up to $100,000 annually, contact Irv Levy, Executive Director or Lorne Steinhart, Senior Manager, Client Relations at the Foundation for Jewish Philanthropies (main phone: 716.204.1133). ???