By LouAnn Schulfer, AWMA®, AIF®
Accredited Wealth Management Advisor^SM
Accredited Investment Fiduciary®

Periodically, we’ve had clients tell us they wish to make a large donation to a charity or to their church.  If they are over age 70 ½, an option to consider is a Qualified Charitable Distribution.  Here’s an example of how a QCD can be a win-win-win situation.

Awhile back, I had a client tell me how much he appreciated a certain organization in town and that he planned to give them a $25,000 donation.  I knew they were an established 501c(3) charitable organization, and my client is 75 years old.  These are the perfect qualifications to consider a Qualified Charitable Distribution.  Rather than write a check from his after-tax investment accounts, we requested a QCD from his IRA, where the IRA custodian writes the check directly to the charitable organization.  In doing so, the $25,000 was withdrawn as a gross distribution from the IRA, and because the money is not being received by the IRA owner, he did not have to pay income taxes that he otherwise would have on the withdrawal.  Since the money is received directly by the charity and they are an established tax-exempt organization, they also do not pay tax on the gift.  The $25,000 can also be counted toward his required minimum distribution (RMDs were waived in 2020).

The client’s win was not having to pay the ordinary income tax that he otherwise would have on the $25,000 that he had planned on giving anyway.  The organization’s win was receiving the money they needed.  Our community’s win was a stronger organization to serve our residents.  Win-Win-Win!

LouAnn Schulfer is co-owner of Schulfer & Associates, LLC Wealth Management and can be reached at (715) 343-9600 or louann.schulfer@lpl.com.  www.SchulferAndAssociates.com

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Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.