The impact of SECURE 2.0 on charitable giving, retirement planning
New legislation offers 'Legacy IRA' provisions and a boost for QCDs
Congress passed the much-anticipated, $1.65 trillion-dollar omnibus spending bill known as the Consolidated Appropriations Act of 2023 on Dec. 23, 2022, followed by President Biden signing the act into law on Dec. 29, 2022. At more than 4,000 pages, the act includes a wide range of provisions that impact multiple sectors.
Of particular interest to attorneys, accountants and wealth managers who advise philanthropists are the provisions starting midway through the bill. The bipartisan legislation often referred to as "SECURE 2.0" is included in the CAA legislation. As background, SECURE 2.0’s provisions build on the original SECURE Act of 2019 ("SECURE" stands for "Setting Every Community Up for Retirement Enhancement"). SECURE 2.0 includes the Qualified Charitable Distribution (QCD) enhancements that have been in the works for many months.
Here are three key provisions affecting philanthropists in the new law:
- Taxpayers may now make a one-time $50,000 QCD transfer to a charitable remainder trust (CRT) or other split-interest gift such as a charitable gift annuity (CGA). These are the "Legacy IRA" provisions. Note that the law effectively mandates that the CGA or CRT be created solely for the purpose of receiving a QCD because the new statute requires that the vehicle contain only IRA assets. Beginning in 2024, the $50,000 limit will be indexed for inflation.
- The required minimum distribution (RMD) age (previously 72) increased to 73 on Jan. 1, 2023. The age will increase to 75 beginning on Jan. 1, 2033. While this provision is not directly tied to charitable giving, it will nonetheless impact your clients’ overall financial plans and potentially affect the timing and strategy of their philanthropy. As a reminder, required minimum distribution refers to the mandated amount that a taxpayer must withdraw from qualified retirement plans, which include IRAs as well as 401(k)s and other tax-deferred retirement accounts.
- Beginning in 2024, the annual per-taxpayer $100,000 QCD cap will be indexed for inflation, which will allow taxpayers to give even more from their IRAs directly to charity.
Here’s what has not changed:
- Eligibility for making a QCD still starts at age 70 ½. This allows taxpayers who are not yet required to take IRA distributions under the RMD rules to still take advantage of the QCD technique without the income tax hit on the distributed funds while also removing those funds from liability for future estate taxes.
- Taxpayers required to take RMDs can still count QCDs toward their RMDs, thereby avoiding the usual income tax hit on RMD dollars.
- Charities eligible to receive QCDs include designated funds, field-of-interest funds (including affiliate funds), and scholarship funds at the community foundation, but still not donor-advised funds.
For more information about how these provisions may impact your clients, contact Laura Lederer. We’re always available to answer your questions about philanthropy or to schedule a personal consultation with you and your clients – all at no cost.
This content is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.