QCD IRA to Charitable Remainder Trust as RMD

Investing Strategies Retirement Investing
1

Fidelity reports that as part of Secure Act 2.0 Congress now allows an individual to make a one time contribution to a CRUT or similar charitable trust from their IRA. In 2014 the limit is $53000 (adjusted for inflation annually). The transfer is not taxable and counts as an RMD but the charitable trust must pay taxable income to you for life or a specified term (often 20 yr). The effect is to defer taxes on the transfer from this year to years in the future.

“One-time, split-interest election: Section 307 includes a one-time election for a QCD to a split-interest entity. In 2024, this indicates an ability for donors to make a QCD of up to $53,000, up from a limitation of $50,000 in 2023. This QCD can fund one of either a Charitable Remainder Unitrust (CRUT), Charitable Remainder Annuity Trust (CRAT) or Charitable Gift Annuity (CGA).”

https://www.fidelitycharitable.org/articles/secure-act-2-0-retirement-provisions.html

You can spend thousands having an attorney set up a Charitable Remainder Trust for you. Some charities will set one up for you in return for the remainder payments. I was able to find two that would do that for a minimum of $100K. I am told that religious charities (Catholic, Jewish, etc) and universities will often do this.

Anyone know who will do a $50K trust for individuals?

2

Have you called Fidelity Charitable to see if they will set one up for you?

AJ

3

Thanks for the suggestion.

I’m thinking one time $53K is not worth it. You save income tax on that (abt $15.9K at 30% fed and state). You might earn 8% on your money. In 20 years that is $84,800 + $53,000=$137,800. But then taxes get $41340 netting $96460. Seems to be no advantage compared to investing the $53K at 8%. Best if you are in high income tax backet now and expect not to be later. Otherwise not worth the trouble especially if you have to pay accountants and lawyers to set it up and file taxes.

4

The new provision is probably only really useful for someone who wants to add to an already existing CRUT, or had a plan to set up a CRUT even without the new provision.

AJ

1 Like
5

But only CRUTs that pay to self or spouse qualify. Many others are excluded by the rules.