IRA charitable rollover / Qualified charitable distribution

IRA charitable rollover

The IRA Charitable Rollover provides you with an excellent opportunity to make a gift during your lifetime from an asset that would be subject to multiple levels of taxation if it remained in your taxable estate.

To qualify

• You must be age 70 ½ or older at the time of gift.
• Transfers must be made directly from a traditional IRA account by your IRA administrator to Virginia Commonwealth University*. Funds that are withdrawn by you and then contributed do NOT qualify. Gifts from 401k, 403b, SEP and other plans do not qualify.
• Gifts must be outright. Distributions to donor-advised funds or life-income arrangements such as charitable remainder trusts and charitable gift annuities or to obtain other benefits such as tickets to athletics events, do not qualify.

Benefits—qualified charitable distributions

• Can total up to $105,000.
• Are not included in your gross income for federal income tax purposes on your IRS Form 1040 (no charitable deduction is available, however).
• Count towards your required minimum distribution, if you have one.

Life Income Gift CAA 2023 allows for a one-time distribution to create a life-income gift, most commonly a charitable gift annuity (CGA), and charitable remainder unitrusts (CRT) or annuity trusts. This new type of QCD is a one-time maximum transfer of $53,000 to a qualified CRT, or in exchange with a charity for a CGA. *Important terms and conditions apply. Please contact our office or your financial advisor.

This type of gift will reduce the value of your IRA, therefore reducing your future RMDs (as they will be based on the lower value). Also, a CGA provides a constant guaranteed lifetime stream of revenue. Using a distribution from your IRA to create an annuity is a savvy way to diversify your holdings and lock in a great return.

As always, we recommend that you consult a qualified advisor before making a new gift commitment.

Example

Jane wants to contribute to Virginia Commonwealth University. She is 73* and is required to take a minimum distribution of $20,000 from her IRA but does not need the income. She can authorize the administrator of her IRA to transfer $20,000 to VCU. The $20,000 distributed to VCU will not be subject to federal tax and will be counted toward her annual minimum required distribution.

*Note that under the Secure Act 2.0, the age at which you are required to make minimum distributions (RMD) was raised to age 73 for individuals born between 1951 and 1959, and age 75 for those born in 1960 or later.

Sample letter

See below for a sample letter you can send to your plan provider to initiate a rollover. Make sure that you contact us when you direct the rollover so we can look for the check from your IRA administrator.

Sample letter of instruction from donor to IRA provider

{Date}
{Name of IRA Provider}
{Address}
{City, State, Zip}
(Call your plan provider to determine the most efficient way to send this letter of instruction)

Re: Request for Qualified Charitable Distribution from Individual Retirement Account

Dear Sir or Madam:
Please accept this letter as my request to make a qualified charitable contribution from my Individual Retirement under Sec. 1201 of the Pension Protection Act of 2006 (the PPA) and Sec. 408(d)(8) of the Internal Revenue Code of 1986, and made permanent under the Consolidated Appropriations Act of 2016. My account Number is {Account Number}.

Please issue a check in the amount of $____________ payable to {name of appropriate affiliated foundation} at the following address:

Virginia Commonwealth University
Gifts and Records Management
Box 843042
Richmond, VA 23284-3042

In your transmittal, please state my name and address as the donor of record in connection with this transfer, and copy me on your transmittal. It is my intention to have this transfer qualify during the {Year} tax year. Therefore, it is imperative that this distribution be postmarked no later than December 31, {Year}.

If you have any questions or concerns regarding this request, I can be reached at {Phone Number} or {Email Address}.

Thank you for your prompt attention to and assistance with this matter.

Sincerely,
{SIGNATURE OF IRA OWNER}