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While many of your clients will benefit from reduced tax rates and expanded tax brackets under the new tax laws, it’s likely that many will elect not to itemize this year. Rather, they will opt to claim the higher standard deduction ($12,000 for single filers and $24,000 for married filing jointly).
With that in mind, here are charitable giving strategies that allow your senior clients (donors) to take advantage of the higher standard deduction while also, avoiding taxes on their RMDs. And you can manage investments.
With the change in tax law last year, people ages 70½ (and qualified spouses) are able to direct distributions (they are called Qualified Charitable Distributions – QCD) from their traditional IRA to eligible charitable organizations. Amounts distributed count toward their Required Minimum Distribution (RMD). Thus, your client/donor avoids the tax bite on the IRA distribution with no effect on taxable income. The net result is clients can take advantage of the higher standard deduction and avoid taxes on their RMD. It’s a win-win-win strategy that works.
Even though QCDs cannot be made to donor advised funds, private foundations or supporting organizations, iGiftFund offers QCD solutions that do qualify. These solutions include:
Your client/donor directs their QCD to iGiftFund and specifies the charity or charities up-front. You invest the fund with an endowment objective and the donor selects a spending policy. iGiftFund will make annual distributions to the charities chosen, in amounts as allocated by the donor. Clients at this age typically have favorite charities that fit this strategy. These funds can be used to support their favorite church, hospital, university, etc. The designated fund can be used to establish a scholarship program at the donor’s high school or college.
Your client specifies up front the philanthropic area of interest, i.e. the arts, health, the environment, etc. iGiftFund’s Board decides annually which charity or charities best fit the client’s chosen field of interest.
Your client leaves the decision for grantmaking to iGiftFund’s Board to address the changing needs of the community, typically in collaboration with the donor’s local community foundation which understands the needs of the community.
What are the advantages to you client of these strategies?
Your client can:
- Create the fund in their name or that of a loved one as an enduring legacy
- Receive Qualified Charitable Distributions (QCD) from IRAs and satisfy required minimum distributions requirements (RMD) with no effect on Adjusted Gross Income (AGI)
- Contribute a wide variety of asset types
- Enjoy the best available tax benefits
- Recommend you to manage investments in open architecture on your familiar investment platform. Your role is much like that in iGiftFund’s donor advised fund
- Add to the fund as desired
- Retain an option in a designated fund to redirect support should the specified charity cease to exist
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