Secure Act 2.0: New Charitable Planning Opportunities With Retirement Plans

Secure Act 2.0: New Charitable Planning Opportunities With Retirement Plans*
Information acquired through ELCA Foundation license from an article distributed by American Council on Gift Annuities (ACGA)

The following are new relevant provisions from the Secure Act 2.0 signed into law by President Biden on December 29, 2022.

• RMDs: Beginning in 2023, the Act raises the age for required minimum distributions (RMDs) as follows:

  • To age 73 for individuals born between 1951 and 1959

  • To age 75 for individuals born between in 1960 or later

• QCD Inflation Adjustment: Beginning in 2024 the annual limit for qualified charitable distributions (QCDs) will increase annually (indexing for inflation).

• Some reminders about QCDs:

  • A QCD is a tax-free transfer from an IRA to a qualified charity

  • The QCD does not qualify for an income tax charitable deduction but does escape income tax liability on the transfer

  • The current limit for an outright QCD is $100,000

    • This amount will increase in 2024 by an amount to account for inflation

  • A QCD must be transferred directly to the charity (or life income plan as discussed below)

    • Delivery can be in the form of a check or wire transfer

  • Funds in another type of qualified retirement plan can be transferred tax-fee to an IRA then from the IRA to charity

  • A QCD cannot be made to a donor-advised fund, supporting organization, or private foundation

• QCD to Life Income Plan: Beginning in 2023, the definition of a QCD will include a one-time distribution to create a life income plan – either a CGA or CRT/CRAT

• This type of QCD is a one-time maximum transfer of $50,000

• This can only be once during the donor’s lifetime

• This option is available to individuals 70.5 year of age and older

• The CGA or CRT must meet the following:

  • Must pass the 10% minimum income tax charitable deduction test

  • Must have a minimum payout rate of 5%

  • A CRT must also pass the 5% probability test

  • The transfer is one-time only up to $50,000 – a donor can transfer less than $50,000 but cannot carryover the balance to another year

  • The $50,000 maximum will be indexed for inflation beginning in 2024

  • All payments by the CRT or CGA funded by the QCD must be fully taxable at the recipient’s ordinary income tax rate

    • There is no possibility of tax-free payments or income taxed at the capital gain tax rate from the CGA or CRT

  • Only the IRA owner and/or his/her spouse may receive payments from the CRT or CGA

    • No payments are allowed to children or others

  • A CRT created with a QCD cannot later receive other gifts from the IRA or other donated assets

  • A CGA funded with a QCD must have a payout rate of at least 5%

    • This typically won’t be a problem for single-life CGAs as the ACGA rates begin at 5% for a donor aged 61

    • Be careful that two-life CGAs meet the 5% minimum payout rate

  • The CGA cannot be a deferred CGA

  • CGAs funded by a QCD must be non-assignable

As we approach the end of the year, we in the Grand Canyon Synod Office of the Bishop are happy to help ensure that you realize the greatest benefit for your faithful generosity. Connect with your Grand Canyon Synod stewardship staff to get started today!

Rev. Dan Potaznick, CFRE
Director of Generosity & Strategic Development

Office of the Bishop, Grand Canyon Synod

Email: Dpotaznick@gcsynod.org

Phone: (602) 957-3223

Lisa Marie Higginbotham, CFRE
Gift Planner, ELCA Foundation

Grand Canyon Synod (AZ)

Email: lisa.higginbotham@elca.org

Phone: (773) 380-2477

Josh Kerney, CFRE
Gift Planner, ELCA Foundation

Grand Canyon Synod (NV & UT)

Email: josh.kerney@elca.org

Phone: 530-520-0142