Planned Giving

How the Omnibus Bill Is Affecting Charitable Giving

Shortly before the end of 2022 the Consolidated Appropriations Act of 2023, commonly known as the omnibus bill, was passed by Congress and signed into law by the President. The bill included numerous provisions pertaining to retirement plans, some of which could affect your future charitable gift planning. Here are two of the provisions that are more likely to have an impact on your planning.

Adjusting qualified charitable distributions (QCDs) for inflation

Beginning in 2006, individuals who have an IRA and are aged 70½ or older have been able to make direct, tax-free transfers of funds from their IRA to one or more charities and have the amount transferred count towards their required minimum distribution (RMD). Such a transfer could be made year after year. The maximum amount that could be transferred in any one year was initially set at $100,000, and it had not increased. The omnibus bill finally adjusted the cap for inflation beginning in 2024. Taking into account the inflation adjustment, the ceiling for 2024 is $105,000. This may enable individuals with large IRA balances who will not need all of the assets in their IRA for living expenses to transfer larger amounts to charities for their missions.

Permitting transfers from an IRA to a life-income plan to count as a qualified charitable distribution

Until the enactment of the omnibus bill, only IRA transfers for outright gifts qualified as QCDs. But an outright gift would diminish the assets remaining to generate income and be available for distribution. Consequently, many people could not afford to make a gift from their IRA. However, they might be able to give some of their IRA funds if they could still receive income from them.

Beginning in 2023, the omnibus bill allows a transfer of IRA funds for a life-income plan that pays income to the IRA owner and/or the owner’s spouse. Unlike a transfer for an outright gift, which can be made repeatedly, a transfer for a Iife-income plan can be made only once during the donor’s lifetime. The maximum amount that could be transferred during the selected year was $50,000 in 2023, but it, too, is adjusted for inflation beginning in 2024. Taking that adjustment into consideration, the ceiling for 2024 is $53,000.

The life-income plan could be either a gift annuity or a charitable remainder trust. The gift annuity is more common because it can be established with a smaller amount. Also, the security of fixed payments for life is appealing.

It is possible, in the selected year, for the donor to transfer IRA funds both for an outright gift and for a life-income plan. The combined limit in 2024 would be $105,000. For example, the IRA owner could transfer $50,000 for a life-income plan, such as a gift annuity, and $55,000 for an outright gift.

Any amount transferred, whether for an outright gift or a life-income plan, provided it is within the allowable limits and meets certain other requirements, is known as a qualified charitable distribution.

Increasing the beginning age for required minimum distributions (RMDs)

For many years, the required minimum distributions from an IRA and certain other retirement plans had to begin when the account owner attained age 70½, but the SECURE Act, enacted in 2019 raised that age to 72. The omnibus bill has further raised that age to 73 for those who attain age 72 between January 1, 2023, and December 31, 2032, and to 75 for those who reach age 74 after December 31, 2032. The minimum age at which you can make a QCD from your IRA to a charity remains at 70½.

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