What is a Legacy IRA and Is It For Me?
For those of you in the Required Minimum Distribution (RMD) taking stage, who are also charitably inclined, there is a new option, appropriately nicknamed “legacy IRA”. As always, the rules are complicated and the answer to most questions is “well that depends” but have a read here and then call if you want to learn more. We will phone a friend if needed!
What is a Legacy IRA?
A Legacy IRA is also known as a Qualified Charitable Distribution Charitable Gift Annuity (QCD CGA). Under certain conditions (this is the “it depends” part) a donor can make a
one-time per tax-payer
tax-free
charitable distribution up to $53,000 in 2024
across multiple charities if desired and allowed by charities
This donation is in exchange for an income stream for a period of years. Yes, this is an annuity of sorts.
This distribution counts toward your RMD in the year the donation is executed.
A standard charitable contribution (QCD) can also be made in the same year for the additional allowable amount (which is an additional $52,000 in 2024).
The annuity payments can be made to the donor or spouse
All annuity payments are taxable as ordinary income in the years received
Minimum annuity pay-out is 5% annually.
Charity must have capability to do since the charity is responsible for the documentation
Why do?
No tax bill on the distribution
Income stream for life (annuity-like)
Proceeds on death go to your designated charity
There is also an option to make this one-time contribution to a Charitable Remainder Trust (CRT) rather than to a Charitable Gift Annuity. That is equally as complicated so call on that too.