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Q: What is the Legacy IRA Act of 2023?
A: The Legacy IRA Act, which went into effect January 2023, changes the law on Qualified Charitable Distributions (QCD) from an Individual Retirement Account (IRA) to now allow those age 70 ½ or older to make a one-time, $50,000 QCD directly from an IRA in exchange for a charitable gift annuity. This is a new opportunity for traditional IRA owners to give a QCD to a publicly qualified charity such as Rice and receive income benefits in return.
Q: Can you use a QCD for less than $50,000 in exchange for a charitable gift annuity?
A: Yes, however the current legislation requires the exchange(s) to occur within ONE calendar year. Depending on the charity's minimum amount required to set up a charitable gift annuity, you may make more than one charitable gift annuity to benefit yourself and/or your spouse together or individually.
Q: Can both my spouse and I use the QCD option to fund a charitable gift annuity?
A: Yes, as long as you both are 70 ½ years or older, you each get a maximum of $50,000 to fund one or more charitable gift annuities.
Q: Can anyone be a beneficiary of the income payments when I use a QCD to fund a charitable gift annuity?
A: No, only you, your spouse or both of you can be the life income beneficiaries under a gift annuity funded by a QCD.
Q: Does the Legacy IRA Act continue past 2023?
A: Yes, you can initiate funding a charitable gift annuity anytime in the future, but again, you only have one calendar year to take advantage of using all $50,000 in funding opportunities.
Q: Can I use a QCD in exchange for a charitable gift annuity with more than one charity?
A: Yes, but all gift annuities must be acquired in the same taxable year with a maximum total of $50,000 for your lifetime.
Q: How are the gift annuity payments taxed using a QCD to fund the annuity?
A: All payments are 100% ordinary income and are taxed accordingly.
Q: Can you terminate the gift annuity early if you no longer need the life income payments?
A: With a gift annuity funded with a QCD, the owner may not terminate the fund early and must receive all payments throughout their lifetime as specified in the charitable gift annuity agreement.
Q: Is there a charitable deduction for an annuity funded by a QCD?
A: No, using a QCD excludes your contribution from your gross income, meaning there are no income tax consequences. As a result, you do not receive a charitable deduction for the gift annuity.
Q: Does the traditional QCD gift to charities still exist?
A: Absolutely! This new option to fund a charitable gift annuity with a QCD from your traditional IRA is an expansion of the existing QCD law, not a replacement of the prior law. Many people have been requesting this giving opportunity ever since the QCD law was first passed in 2005, and now all who want to use a portion of their IRA this way can do so.
Questions? For more information about funding a charitable gift annuity with a QCD or other asset, or for a personal illustration, please contact the Rice Office of Gift Planning at 713-348-4624 or [email protected] .