Give from Your IRA and Receive a Lifetime of Payments
Donors over 70½ can receive a lifetime of payments in return for a contribution to the American Red Cross from their IRA account. This gift plan combines a charitable gift annuity and a Qualified Charitable Distribution (QCD) from an IRA. Let’s see how it works.
Charitable Gift Annuity — A charitable gift annuity is a simple contract between you and the American Red Cross promising to pay you a fixed amount of money each year for life. The gift annuity contract is issued to you in exchange for your charitable contribution. The amount the American Red Cross will agree to pay you depends upon your age at the time of your gift and does not change for the rest of your lifetime. The the American Red Cross invests and manages your contribution and your payments are backed by the financial resources of the American Red Cross. Some or all of the payment you receive each year is taxed as ordinary income.
Qualified Charitable Distribution — A QCD — sometimes called a “charitable rollover” — is a contribution from your IRA directly to the American Red Cross. You can make a QCD if you are at least age 70½ at the time of your gift. Unlike other distributions from your retirement accounts, you pay no income tax on a Qualified Charitable Distribution, although there is no charitable deduction for your contribution. However, your QCD contribution counts toward your Required Minimum Distributions (RMD) from your IRA without creating taxable income for you.
Charitable Rollover Gift Annuity — Under a new law effective in 2023, some donors can make a QCD in exchange for a charitable gift annuity. There are some rules and limitations:
- You can exercise this option over a single calendar year and only once during your lifetime.
- There is an aggregate limit of $50,000.
- The entire payment you receive from your charitable gift annuity will be subject to income tax.
- You can include your spouse as a recipient of the annuity payment.
- While there is no income tax deduction for this contribution, there is no tax on the QCD either.
Consider Alan, a 75 year old who would like to make a special contribution to support the American Red Cross. Alan has an IRA, and knows that he is facing a Required Minimum Distribution (RMD) this year. Alan knows that his RMD is going to increase his income tax. Instead of withdrawing the funds from his IRA, Alan instructs his IRA custodian to make a $50,000 QCD directly to the American Red Cross in exchange for a charitable gift annuity which will pay him $3,300 (6.6%) per year for the rest of his lifetime. Alan understands that he is allowed to make this election only one time, but he is looking forward to securing a stream of payments for his lifetime, meeting or reducing his RMD for the year and making a generous contribution to the American Red Cross.
Please contact your local giving specialist or email firstname.lastname@example.org or call 1-800-797-8022, ext. 5 for more information. We would be happy to work with you and your advisors to help determine whether this new option is right for you.