December 23, 2019
New IRA Law Does Not Affect Gifts
As of Jan. 1, 2020, Individual Retirement Accounts (IRA) will have a number of new provisions pertaining to various retirement programs, but not gifts.
• IRAs will now be subject to required minimum distributions (RMD) when the account owner reaches the age of 72. Currently the age is 70 ½.
• An IRA owner will still be allowed to arrange a qualified charitable distribution (QCD) on a voluntary basis. By qualified, the IRS means the charitable recipient is a registered 501 (c)(3); your Air Force Association meets this test.
• Although the RMD age is rising, QCDs may be made when the IRA owner reaches 70 ½ years of age.
• The QCD can consist of a portion or all of the RMD, and/or an additional amount beyond the RMD, and remains as excluded from taxable income in the year it is transferred to charity.
• The RMD is an IRS actuarially determined amount.
• A QCD is account owner determined and has a cap of $100,000 annually.
• An additional change concerns IRAs that are transferred to an heir upon the owner’s passing. The new law now specifies the heir’s income must be taken within a 10-year timeframe, except when the beneficiary is the owner’s spouse. In the past, income taxes were calculated on the life expectancy of the new owner, thus a lower tax amount. For this reason, advisors recommend designating a charitable recipient for the IRA‘s ownership because of tax-exempt status, and bequeathing other assets to persons.
Therefore, donors who desire to support their Air Force Association through a QCD remain able to do so when they reach the age of 70 ½, and we are grateful for this consideration.
For additional details, contact AFA’s Director of Development, Wesley Sherman, 703-247-5831, WSherman@AFA.org, to get more information.