Your Temecula Estate Planning Attorney would like to know, how would you like to take your IRA required minimum distribution (RMD), not have the distribution count as income and be able to gift to your favorite charity?

Well, you can by using a Qualified Charitable Distribution (QCD) from your IRA.

Required Minimum Distributions (RMDs) are amounts that you must withdraw annually from your Traditional IRA once you reach 72 years of age. If you do not withdraw your RMD, you will face a penalty tax of 50% of the required withdrawal amount. 

Normally, funds that are distributed from a Traditional IRA are includible in your taxable income, which is likely to increase your overall tax burden. In some cases, this additional income may also move you into a higher tax bracket.

However, QCDs are an exception to this rule—funds go directly from your IRA to your chosen charitable organization without going to you first, thereby lowering your adjusted gross income and effectively reducing your income taxes.

QCDs are also sometimes referred to as IRA Charitable Rollovers. Up to $100,000 in IRA funds can be counted as QCDs annually or $200,000 for married couples.If you are 70½ years of age or older and have a Traditional IRA, you are eligible to make a QCD.

For example, if your 2022 RMD was $3000, and you made a $3000 qualified charitable distribution for 2022, you would have satisfied your 2022 required minimum distribution.

Because in most cases QCDs do not need to be recognized as income, charitable organizations receive the full amount of the transfer tax-free. It’s a win-win situation that both support you and the causes you care about.

To speak to our Temecula Estate Planning Attorneys about what tax saving estate planning options are available to you, contact us at (800) 244-8814! 

If you have any further questions about estate planning and strategies to shield your wealth, or if you’d like to have your current asset protection plan reviewed to make sure it still meets your needs, please contact us at one of our offices located throughout the state of California 800-244-8814 to set up a consultation.

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