Use your IRA distributions to create a charitable legacy
Required minimum distributions (RMDs) are back: Temporarily waived in 2020 under the CARES Act, these mandatory IRA distributions will once again need to be completed by year's end. Retirees who did not take their RMD in 2020 may also find they need to take an even larger distribution this year because their account balance has increased.
One solution to alleviate the potential tax burden of these distributions is to use your RMD to make a qualified charitable distribution (QCD). These tax-free distributions are a financially advantageous way for people age 70 ½ or older to turn their retirement savings into a meaningful gift to their favorite charities. But rather than making a one-time gift, consider using your QCD to establish a charitable fund that will benefit the causes you love for years to come.
Although QCDs cannot be made to a donor-advised fund, they CAN be used to establish other types of charitable funds at Akron Community Foundation.
Designated funds are a great choice if you prefer to support the same charities every year. These funds streamline the giving process by automatically awarding annual grants to one or more charities selected by the donor. You simply name your fund, choose the charities you would like to support, and make a tax-free transfer directly from your IRA to establish the fund. The community foundation then handles all the administration and check writing.
In future years, you can simply direct your annual RMD to your designated fund, allowing you to support multiple charities with just one QCD. Charitable dollars in the fund are invested and will grow tax-free, increasing your impact on the causes you care about. Most designated funds are also permanently endowed to ensure your legacy lives on long after you are gone.
In addition to designated funds, the community foundation also offers scholarship, field-of-interest and board discretionary funds, all of which can be created with a QCD from your IRA. Funds can be named in honor of your family or business, or can even be named anonymously if you wish to protect your privacy.
If you want to support targeted geographic regions or causes, Akron Community Foundation also has seven affiliate funds whose annual grants benefit programs serving women, children, LGBTQ+ individuals, racial minorities, Bath Township and Medina County. All of these funds can accept gifts of IRA assets, allowing you to support a wide array of charities with a single transfer.
Finally, inherited IRAs create taxable income for beneficiaries, meaning you may find it's more advantageous to use your retirement assets to grow your fund at Akron Community Foundation tax-free, while leaving more favorable assets like appreciated stock to your heirs. This is especially true in light of the SECURE Act, which eliminated the stretch IRA and requires non-spousal beneficiaries to take the distributions within 10 years.
To learn more about how you can maximize the impact of your retirement assets, contact Margaret Medzie, vice president and chief development officer.