You may be aware of donor-advised funds and the reasons behind their popularity. Especially when a donor-advised fund is established at the community foundation, this vehicle is an excellent way for you to organize your charitable giving and get even more connected to the causes you care about.
Enter the Qualified Charitable Distribution
You can give nearly any type of asset to a donor-advised fund at the community foundation. A notable exception, though, is the Qualified Charitable Distribution (QCD). A QCD allows a taxpayer 70 1/2 or older to make a direct transfer of up to $100,000 annually from an IRA to a qualifying charity. A donor-advised fund is not considered to be a qualifying charity.
Although donor-advised funds cannot accept QCDs, the community foundation offers other types of funds that can accept QCDs. For example, designated funds and field-of-interest funds held at the community foundation are ideal recipients of QCD transfers. These fund types are often overlooked, despite the high value they can deliver to you and to the community.
What is a field-of-interest fund?
The Council on Foundations defines a “field of interest fund” as, “A fund held by a community foundation that is used for a specific charitable purpose such as education or health research.” Perhaps you are passionate about rare-disease solutions, feeding the food insecure or preserving works of art, for example. You select the name of the fund (family, cause-related or even nondescript) and then, our knowledgeable team distributes grants from the field-of-interest fund in a way that is aligned with your values and charitable wishes outlined in the fund documentation.
What is a designated fund?
Designated funds are defined as, “A type of restricted fund in which the fund beneficiaries are specified by the grantors.” These are a good choice if you know you would like to support a particular charity or charities for multiple years. You name the fund, and the community foundation fulfills the distributions. Made over time, these funds can help charities’ cash flow planning. Distributions are aligned with wishes set forth in the original fund document.
For anyone aged 70 1/2 through 72, a QCD removes funds from an IRA before they reach the age-73 threshold for Required Minimum Distributions (RMDs). This can lessen the eventful income tax hit that accompanies RMDs. And for RMD-applicable individuals, the QCD counts toward their RMD. In both cases, the QCD transfers do not fall into the individual’s taxable income.
QCDs are even more popular now that the $100,000 cap will be indexed for inflation under the new laws. Also, under the new laws, a one-time, $50,000 distribution to a charitable remainder trust or charitable gift annuity is now permitted.
Reach out to our team to learn more.