Twenty years ago today, on August 17, 2006, President George W. Bush signed into law the Pension Protection Act of 2006. It’s a large bill, with hundreds of pages of text covering many topics—fourteen titles and 154 sections, by my count. It contains many provisions—some well-known and some obscure—covering various issues related to retirement. It is toward the end of the Act, in Title XII, where the sections most relevant for charitable organizations come into play.
Among the several then-new provisions of the PPA affecting charitable giving (notably including then-new rules for donor advised funds, changes to deductibility of gifts of fractional interests in tangible personal property, and various updates to the tax substantiation rules, including requiring qualified appraisals for certain non-cash gifts over $5,000), perhaps the most consequential for charities and donors over the last 20 years—and for the years to come—is found in Section 1201: the introduction of the IRA Qualified Charitable Distribution (“QCD”), sometimes colloquially called the “IRA Charitable Rollover.”
As a quick reminder for any who may not be familiar, here are the basic guidelines for QCD gifts:
The gift must be from an IRA, not from a 401(k) or other qualified retirement plan account (but see P.S. below).
The check or distribution must come directly from the IRA administrator to the qualified public charity.
The donor must be at least 70-1/2 years old at the time of the distribution.
For donors age 73 or over, QCDs can count toward and satisfy annual required minimum distributions (RMDs).
A donor can give any amount up to $111,000 ($222,000 per married couple) in 2026 without including the QCD in gross income.
Because the QCD is excluded from gross income, there is no charitable income tax deduction for it.
Donors may enjoy a tax benefit from a QCD whether they itemize or take the standard deduction.
A QCD cannot be made to a Donor Advised Fund or to a private foundation (but see P.S. below).
With the limited exception of the one-time opportunity to fund a life-income gift (Charitable Gift Annuity or Charitable Remainder Trust) with a QCD in an amount up to $55,000 this year, indexed for inflation, there can be no quid pro quo in exchange for a QCD. This means nothing of substantial value that would reduce what would otherwise be a deductible amount. As Conrad Teitell might say, “Not even a rubber chicken dinner.”
Giving through QCDs has grown enormously since enactment in August 2006. The NCPG (now National Association of Charitable Gift Planners) reported in June 2007 testimony to Congress having received reports of 4,500 QCD gifts totaling approximately $80 million within that first year. Anecdotally, my previous employers as well as my current nonprofit organization clients have seen dramatic upswings in QCD giving in recent years. Also, my work with individual donor clients bears out their increased familiarity with and use of this way to give as well, particularly since the QCD was made permanent through the PATH Act in 2015. There is little broad national data on QCDs, but a few published reports similarly show accelerating adoption. For example, in 2020, FreeWill reported from its surveys 67% growth in the number of QCD gifts from 2018-19 alone, and estimated 2.9 times average growth from 2017-2019. MarketWatch reported last year that Fidelity saw a 579% growth in the number of QCDs from 2020-2024, describing it as the fastest-growing type of giving. FreeWill further reported just a couple of months ago from its latest QCD report increases of 56% in 2024 and another 47% in 2025 in QCD giving on its platform. While these are internal and survey reports from just a couple of companies and not scientific studies, those observations are examples indicating a clear trend of rapid growth. And yet, I believe we’ve only scratched the surface of opportunity for gifts from retirement accounts, not only with QCDs from IRAs but also in charitable beneficiary designations on qualified retirement plan accounts generally.
In marking the 20th anniversary of what has become a valuable tool for charitable fundraisers, donors, and advisors, I wanted to take this moment to give thanks to those who envisioned it and advocated to make it a reality. In particular, as I understand it, the idea that became the QCD first was championed by the late, great Clint Schroeder and the still-great Conrad Teitell. According to Ron Brown, Schroeder and Teitell began advocating for the “charitable rollover” at the American Bar Association as far back as 1982. I always thought of Clint and Conrad, along with Charles Schultz, as the original “Rollover Rangers.” (Indeed, I remember personally hearing Clint and Charles, and I think Conrad too, referring to the Rollover Rangers in conversation or sessions with them prior to the passage of the PPA.) I’m sure someone will correct me and set the record straight if wrong, but I believe that early group also included Frank Minton, Emil Kallina, Craig Wruck, and Tanya Howe Johnson. They didn’t do it alone, though. I know many others, including Reynolds Cafferata and Joe Bull, were involved in advocacy toward getting the initial IRA QCD passed. I’m sure there are others I don’t know who I’ve unintentionally omitted as among those leading the charge, and thank you to them as well. I’ve been lucky enough to have learned things from each of these listed folks over the years, and to have had Clint as an early mentor (first met him as a fresh-faced 1L in law school—30 years ago this fall!—but really got to know him well starting in 2005 when I left the Dorsey firm to join Frank Robertson and Jane Townsend on the University of Minnesota Foundation Planned Giving team). Thank you to all who worked to make the QCD a reality, whether named here or unnamed.
Happy 20th Birthday, IRA QCD! 😊
P.S. Two bills currently under consideration before Congress would expand QCDs, if enacted:
P.P.S. It occurred to me that this summer also marks another less significant (but still meaningful to me) anniversary: 10 years of Generoworks! I’m grateful to all who have given me a chance to help others through it, and will have to write more on that topic another time. Lots to celebrate!
By now you’ve likely heard about the SECURE Act, and maybe
know a little about it. Titled
consistently with the painfully common Congressional penchant for semi-clever
acronyms, “SECURE Act” is short for “Setting Every Community Up for Retirement
Enhancement Act of 2019.” The SECURE Act
was signed into law by the President on December 20, 2019, as Division O of the
Further Consolidated Appropriations Act, 2020.[1] It consists of approximately 46 pages near
the end of the larger 715-page bill.[2]
Now, you probably are saying to yourself, “Gee, it sure
sounds like a lot of fun to read 46 dense pages of Internal Revenue Code
amendments and cross-references, but I’ve got other things to do…like go to the
gym, make dinner, and watch The PBS NewsHour!”[3] In that case, you are fortunate to be reading
this article which, while not nearly a complete SECURE Act analysis, provides a
basic overview of provisions most likely to affect charitable giving, and tips
for nonprofit development staff in working and communicating with their donors.[4]
There are three changes that most affect charitable gifts and
gift planning:
The age for required minimum distributions (RMDs) from qualified retirement accounts is raised to 72 for donors turning 70½ in 2020 and beyond.
This did not change the minimum age for qualified charitable distributions (QCDs) from IRAs, which remains 70½.
Individuals who reached age 70½ in 2019 or earlier still must continue to take RMDs even if they are not yet 72.
The age restriction on contributions to IRAs is lifted, but that came with a corresponding rule that reduces eligibility for QCDs by the aggregate amount of post-70½ IRA contributions.
The “stretch” payout option for designated beneficiaries of qualified retirement accounts is largely eliminated and changed to a 10-year withdrawal window for most non-spouse beneficiaries.
As a result of these SECURE Act provisions:
People have more incentive than ever to give IRA and other qualified retirement account assets to charity, because now it is a little less appealing to designate those assets to family or other individuals in many cases.
Qualified charitable distributions (QCDs) from IRAs remain attractive, perhaps more than ever, but the rules regarding QCDs just got more complicated and could trip up those who aren’t paying attention.
Charitable remainder trusts (CRTs) funded with retirement assets at death are a potential solution to at least one of the planning problems caused by the recent changes. While it’s important to understand that and propose it as an option for donors in appropriate circumstances, be careful not to over-focus on CRTs, as they will be considered by a relatively small percentage of donors.
A bigger opportunity is beneficiary designations of qualified retirement assets made directly to charity at death, which deserves more marketing and should be discussed with donors more broadly.
Now for a somewhat more in-depth look for those who want to
know more.
Minimum age for
Required Minimum Distributions raised to 72 (for most)
Until January of 2020, owners of qualified retirement
accounts (IRA, 401(k), 403(b), etc.) had to start taking required minimum
distributions (RMDs) from their retirement accounts starting with the year in
which they turned 70½.[6] Notably, the SECURE Act increased the
starting age for RMDs to 72 for individuals who had not yet turned 70½ by
December 31, 2019.[7] The latter part is an important nuance. Some commentators have been making blanket
statements that qualified plan owners now don’t have to take RMDs until age 72,
which is misleading, because the new law only applies to qualified plan account
owners who were not already 70½ before the end of 2019.[8] Those who turned 70½ in 2019 or earlier
(i.e., those born on 6/30/1949 or earlier) still are and will be required to
take RMDs from their accounts, even though some of them may be under age 72.
Why does this change matter to charities? Some have been concerned about a potential
decrease in IRA QCDs.
A slight but important contextual detour: Many of you are familiar with QCDs. However, as a primer for those who are not or
as a refresher for those who are, a qualified charitable distribution is a
special kind of charitable gift that is:
made from an IRA (traditional or Roth[9] IRA only; gifts from 401(k)s, 403(b)s, or ongoing SEP or SIMPLE IRAs don’t count);
distributed directly from the IRA to a qualified public charity (donor advised funds, private foundations, and supporting organizations are not eligible recipients);
from an IRA owner who is age 70½ or older at the time of distribution;
not more than $100,000 per year from any individual donor (married couples may be able to give up to $200,000 per year);
not given in exchange for any quid pro quo (e.g., no charitable gift annuities, charitable remainder trusts, or thank-you items); and
otherwise an income tax-deductible gift for the calendar year, if not for the special QCD tax treatment.[10]
A QCD is excluded from the donor’s gross income, and
therefore is not tax-deductible. For some
donors, the tax result would be the same whether a gift from their IRA is
classified as a QCD and excluded from income or whether it’s a tax-deductible
gift first recognized as income and then taken as a charitable deduction—it’s a
wash or the same outcome either way.
However, for many other donors, the QCD offers a few potential
advantages:
1. A QCD allows donors to get a tax benefit from charitable giving even when they do not itemize deductions. Now that the standard deduction has dramatically increased as a result of the Tax Cuts and Jobs Act of 2017,[11] even fewer taxpayers have enough itemized deductions[12] to surpass their standard deductions, so it makes more sense for them to take the standard deduction instead. For those people, it’s a great idea: QCDs give non-itemizing donors a tax break for charitable giving that they wouldn’t get for a regular charitable gift. Thinking about it another way, a QCD provides a tax benefit akin to an extra deduction on top of the standard deduction. Also, because the special tax treatment reduces gross income, a QCD can help keep non-itemizers in a lower income tax bracket, thus saving additional tax, when an RMD or other IRA distribution would have bumped them up into a higher marginal tax bracket.
2. Another tax advantage of a QCD can apply whether or not the donor itemizes. Some deductions, credits, and other tax benefits are based on adjusted gross income (“AGI”) and phased out at higher income levels, so having a lower AGI preserves more of those tax-saving benefits. As such, QCDs and other “above-the-line” deductions and reductions that lower AGI typically are more valuable to a taxpayer than “below-the-line” deductions such as regular charitable gifts or the standard deduction.
One more aspect of QCDs donors appreciate is that QCDs count toward RMDs, to the extent distributions haven’t already been made from retirement accounts in a given year.
Okay, with that information, let’s return to the SECURE
Act. You probably noticed that the
minimum age for a QCD is the same as the beginning age for RMDs before the
SECURE Act: 70½. While the SECURE Act increased to 72 the age
when RMDs begin, it did not increase the minimum age for QCDs, which
remains 70½.[13] The reason for concern among some development
professionals is a worry that QCDs will decline among people between the ages
of 70½ and 72 because it is feared donors either (a) will wait until age 72 to
start making QCDs because they don’t have to take RMDs until then, and/or (b) mistakenly
will think they can’t make QCDs until they’re 72 or won’t realize they can make
QCDs starting at 70½. While there
certainly could be some drop-off, if qualified public charities do a good job
of messaging to their donors near or in retirement, and if the stock market
stays strong,[14]
they can end up with even more QCDs than ever before. This is a matter of marketing and education.
Why should charities not be too worried about the effect of
the postponement of RMDs to age 72 with respect to QCDs?
For one thing, donors who turned 70½ in 2019 or earlier
still have to take RMDs (or make QCDs instead) and have no disincentive to
starting or continuing QCDs if they’re charitably inclined. Similarly, those who are 72 or older will
notice no change on that front. For younger
donors—those born on or after July 1, 1949—there remains a window of 1½ years
between the minimum age for QCDs and the age for RMDs. The author’s observation, based on personal
experience since 2006 when the QCD first became available, is that the primary
motivation of most QCD donors is not to avoid their RMDs—it’s to support missions
and organizations that they love.
Satisfying the RMD is a nice benefit, but not the purpose. (And, as a reminder, anyone who has an IRA
RMD still can satisfy it—or at least part of it—with a QCD.[15])
Additionally, for the people who are not yet 72 but still can
make a QCD—in other words, they’ve reached 70½ and own an IRA—it’s a pool of
assets now available for charitable giving at zero tax cost (up to $100,000 per
year). Furthermore, QCDs made before
RMDs begin at age 72 will reduce the size of the first and later RMDs, because
account values will be smaller as a result of the charitable distributions
between age 70½ and 72.
The key, as ever, is regular communication to donors ages 70+
about the opportunity. The recent law
changes do introduce more complexity, but that can be finessed in donor
messaging. One example: “The age for required minimum distributions
from IRAs has been raised to 72 for some IRA owners. But did you know you still can make a tax-free
gift to [qualified public charity’s name] from your IRA with other possible
benefits starting at age 70½? For more
information, contact . . . .”
A possible trap for
the unwary
One troublesome effect of the SECURE Act stems from a
provision that widely is seen as positive:
Individuals now can make contributions to their IRAs at any age, lifting
the prior restriction that prohibited contributions by those over age 70½.[16] However, to prevent a double tax benefit
(sometimes referred to as “double-dipping”), the same Act section also adds a
provision that reduces the amount that can count as a QCD if the donor has made
a contribution to an IRA after age 70½ and then took a deduction for that
contribution.[17]
While that seems to be the right result from a tax policy
perspective, in practical terms, this means that the donor or the donor’s tax
preparer will have to keep a running total of deductions for post-70½ IRA
contributions and corresponding reductions in QCDs.
Example:Forrest
Gump, age 75, hears about the SECURE Act change that now lets him make
additional contributions to his IRA. He
still makes a decent amount of earned income mowing lawns, which he
enjoys. In 2020, he contributes $5,000
to his IRA, which he deducts on his income tax return, and does the same in
2021. In 2022, Forrest wishes to make a
gift of $12,000 to a qualified public charity for hurricane relief, and directs
his IRA custodian to make the distribution.
Because of the two contributions of $5,000 in 2020 and 2021, his QCD in
2022 is limited to $2,000, and the remaining $10,000 would be recognized as
income (for which, presumably, he could take an offsetting charitable deduction
if he itemizes, subject to AGI and other usual limitations).
This presents a problem for donors who may be used to making
QCDs and are unaware of this new reduction based on aggregate contributions. The good news is that it’s likely to apply
only to a relatively small number of donors.
The bad news is that charities generally will have no way of knowing
which of their donors have made and deducted post-70½ IRA contributions. One recommendation is to add language to your
organization’s QCD receipts[18]
similar to the following: “If you have
made contributions to an IRA after age 70½, consult with your professional tax
advisor to determine how your circumstances might be affected.” That language at least alerts donors that
there may be an issue if they have made such contributions.
Partial elimination
of stretch payouts from retirement plans as an opportunity for nonprofits
Prior to the SECURE Act, one of the distribution options
available to individual non-spouse designated beneficiaries of an IRA or other
qualified retirement account at the death of the account owner was to receive
distributions over the course of the rest of the beneficiaries’ lives, using
their own life expectancies to determine the RMDs. This option was known as the “stretch”
option, and a significant amount of retirement account planning has been done
on the assumption that designated beneficiaries[19]
would elect that option. The SECURE Act
eliminates the stretch option for most beneficiaries, and now requires that,
with certain exceptions,[20]
qualified retirement accounts now must be distributed to beneficiaries within a
10-year period, for account owners dying in 2020 or later.[21]
So, why does this matter to charities?
Well, having to distribute all of the retirement account
assets within 10 years means having to recognize all of those distributions as
ordinary income in a timeframe most likely shorter than if distributions were
taken in smaller amounts spread out over a beneficiary’s life expectancy,
possibly 20, 30, 40 years, or more. As a
result, it also means (a) the possibility of more taxes paid by individual
beneficiaries, and (b) faster than intended distribution to individual
beneficiaries when the account owners wanted payments spread out over a longer
time for non-tax purposes (for example, a beneficiary with a propensity to
spend money in undesirable ways, or who might be subject to creditors or various
negative influences). Fortunately, one
of the principal solutions to the potential dilemma faced by retirement account
owners who want to provide benefits to children (or others) for longer than 10
years and reduce taxes has a charitable component: a Charitable Remainder Trust (CRT).[22]
To review, a donor establishes a CRT by contributing property to a trustee under a trust agreement or other trust instrument, like a will. The trust provide an income stream for one or more individual beneficiaries for their lives, a term of up to 20 years, or a permissible combination of their lives and a term of up to 20 years. After the end of the trust term, the remaining trust funds (the remainder) is distributed to one or more charitable beneficiaries as designated by the donor in the trust instrument. A CRT can provide either a fixed dollar amount each year (a Charitable Remainder Annuity Trust, or CRAT), or a percentage of the trust assets, revalued annually (a Charitable Remainder Unitrust, or CRUT). For a variety of reasons,[23] most CRTs are CRUTs.
While a CRT may be established and funded either during life
(lifetime or inter vivos) or at death
(testamentary), generally it is a bad idea from a tax perspective to use
qualified retirement account distributions to fund a CRT during life. Use of a testamentary CRUT (TCRUT), however,
addresses multiple concerns raised by the SECURE Act changes to the available
retirement account withdrawal period. A donor
can designate a TCRUT as the beneficiary of retirement accounts at death,[24]
provide income for loved ones for 20 years or for life, and then after the end
of the 20 years or after the income beneficiaries’ lives, the remainder goes to
the donor’s designated charity.
Example: Holly Golightly, widowed and age 78, has
designated her children as beneficiaries of her 401(k) account. She learns that, under the SECURE Act, all of
the account assets must be withdrawn within 10 years of her death with
significant income taxes due, but she wanted her kids to benefit for a longer
time (and further reduce taxes). Thanks
to a savvy new neighbor in her Manhattan brownstone building, she learns about
TCRUTs and decides to include one with a 20-year term and a 5% payout, funded
with the beneficiary designation from her 401(k), as part of her next estate
plan update. After Holly’s death, her
401(k) assets, then worth $400,000, are distributed to the trustee of the
CRUT. There is no immediate income tax
payable, and her estate receives a charitable estate tax deduction for the gift
portion of the transfer. Her children
start receiving 5% of the trust assets each year for the next 20 years, with an
initial annual payment of $20,000. Assuming
the trust investment return, after administrative costs, also is 5% each year, at
the end of the 20-year term the children will have received payments totaling $400,000,
and $400,000 will be distributed to Holly’s favorite charities for poverty
relief in New York.
This is a valuable tool in the toolbox. Many donors, though, don’t feel the need to dictate stretch payments to adult children over more than a decade. As a practical matter, even if the parent assumes or hopes their children will do the tax-savvy, fiscally prudent thing and stretch payments out as long as possible, many times–perhaps most of the time–beneficiaries decide “I’d rather have it all now,” or spend it down more quickly than the parent would’ve recommended, regardless of the tax implications.[25] As such, parents truly concerned about ensuring a longer distribution period, either to provide for a loved one with trouble managing money or for other reasons, should be thinking about establishing a trust or trusts.
For most donors, a simpler solution to reduce taxes is to provide for family with assets other than retirement accounts (for example, home and other real estate, non-retirement investment accounts, life insurance, etc.) and designate retirement accounts directly to their favorite charities. If non-retirement assets aren’t sufficient for what donors want to leave for their families, they still can designate a percentage of their retirement accounts to charity, and leave the balance to family. Or, the donor can designate part directly to charity, and part to a TCRUT for family. There are many options, but the main point is that qualified retirement assets generally are the best, most tax-smart assets to leave to charity at death, both before and after the SECURE Act. The SECURE Act provides a good excuse to talk with donors about that. For many people, their retirement accounts are their largest assets, and nonprofits not messaging to their supporters about including the nonprofit as a designated beneficiary are leaving a huge amount of potential gift revenue on the table.
Recommendations for
Nonprofits
Among the steps for your organization to consider:
Review your Planned Giving and IRA QCD web pages, as well as brochures, one-pagers, and any other donor-facing materials, and update for accuracy as necessary in light of the SECURE Act.
Review IRA QCD receipt templates for appropriate language, and consider adding a brief mention of post-70½ IRA contributions to flag a possible issue for donors who have made such contributions.
Increase communications to donors encouraging consideration of IRA QCDs (donors age 70½ or older) and making your charity a designated beneficiary of retirement accounts (all donors).
For more established and sophisticated Planned Giving programs, increase communications with older donors about life-income gifts (charitable gift annuities and CRTs) generally. The benefits of TCRUTs as a possible solution for those affected by the SECURE Act changes can be raised in this context.
Use the SECURE Act as a good reason to get in touch with donors, but don’t get too technical in communications. Simple, broad messaging with an invitation to a conversation is great. You can include links to more information for those who want it, or an offer to send more detailed explanations.
Make sure not to give or appear to give specific legal, tax, or financial advice, and do encourage donors to check in and talk with their professional advisors. Now is a prime time for many donors to be reviewing their plans, and you want your organization to be in their thoughts as they do.
Every once in a while, changes in tax law present not just
new challenges, but opportunities, and this is one of those times. The SECURE Act, like other past changes, can
result in more and bigger gifts to charitable organizations if we just keep
doing what we always should be doing: listen;
find ways to address donors’ needs, concerns, and goals; communicate well; help
donors realize and accomplish philanthropic dreams that are a reflection of
their personal values; and share stories of our organizations’ missions and
benefits to those our organizations serve.
If we do those things, we all will be more secure.
[1] H.R. 1865, which became Public Law No. 116-94. The bill passed 297-120 in the House, and
71-23 in the Senate.
[2]See Further
Consolidated Appropriations Act, 2020, H.R. 1865, 116th Cong. Div. O
(2019) [hereinafter “SECURE Act”],
https://www.congress.gov/116/bills/hr1865/BILLS-116hr1865enr.pdf
[3]Requiescat in
pace, Jim Lehrer (May 19, 1934 – January 23, 2020).
[4] It also is entirely possible that you would be more
fortunate if you were reading something other than this article, but here we
are.
[6] Prior to the SECURE Act, the required beginning date
(RBD) generally was April 1 of the year following the calendar in which the
account owner turns 70½, or, for certain accounts like 401(k) and 403(b)
accounts, April 1 following the year of retirement, if the account owner
remains employed past age 70½. See https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-required-minimum-distributions-rmds
[8]Seeid. § 104(d) (“The amendments made by
this section shall apply to distributions required to be made after December
31, 2019, with respect to individuals who attain age 70½ after such date.”)
[9] While a QCD from a Roth IRA technically is
permissible, it usually doesn’t make sense to use that asset for charitable
giving if other assets are available, because distributions from a Roth IRA
generally are tax-free.
[10]See generally
Internal Revenue Code § 408(d)(8).
[11] The standard deduction is $12,400 for single or
separate filers and $24,800 for married joint filers in 2020.
[12] Including, for example, charitable gifts, mortgage
interest, student loan interest, state and local taxes, and certain other
expenses, subject to limitations.
[14] A significant market decline would be a much bigger
concern, with much greater potential for gift decline than concerns based on
changes to the law from the SECURE Act.
[15] Someone with an RMD larger than $100,000 could
satisfy the first $100,000 of the RMD with the QCD.
(b) Coordination
With Qualified Charitable Distributions.—Add at the end of section
408(d)(8)(A) of such Code the following:
“The amount of distributions not includible in gross income by reason of
the preceding sentence for a taxable year (determined without regard to this
sentence) shall be reduced (but not below zero) by an amount equal to the
excess of—
“(i)
the aggregate amount of deductions allowed to the taxpayer under section
219 for all taxable years ending on or after the date the taxpayer attains the
age 70½, over
“(ii) the aggregate amount of reductions under this
sentence for all taxable years preceding the current taxable year.”.
[18] You do have receipts for QCDs that are different from
your regular gift receipts, don’t you?
If not, you should—get on it right away!
Also, as a reminder, it’s never a bad idea to include a general
disclaimer that your organization is not providing any legal or tax advice, and
urging donors to consult with their independent professional advisors to
determine how their charitable gifts affect their tax situations.
[20] Exceptions include a designated beneficiary who is a
surviving spouse, a child of the account owner who has not reached the age of
majority, a person who is disabled or chronically ill, or is not more than 10
years younger than the employee/account owner.
See SECURE Act §
401(a)(2)(E)(ii).
[22] A charitable gift annuity (CGA) funded with
retirement assets at death may be another good option in certain circumstances. However, because of some limitations of a CGA,
such as the number of beneficiaries (1 or 2) and administrative challenges with
potential multiple distributions from one or more retirement accounts, a CRUT
provides greater flexibility.
[23] Some reasons people often choose CRUTs instead of
CRATs include the possibility of increased payments over time, preserving
purchasing power as a hedge against inflation, reducing likelihood of
exhausting the trust, and allowing for multiple additions to the trust, among
other things. Also, those who are
interested in the features of a CRAT often instead establish a charitable gift
annuity (CGA) which has similar benefits but is simpler and has less
administrative cost to the donor.
[24] A CRT intended to be funded by assets at death can be
created either by establishing a standalone CRT agreement during life,
initially funding it with a nominal amount (e.g., $10) and then fully funding
it by beneficiary designations or other gifts at death, or CRT provisions can
be included in traditional estate planning documents like a will or revocable
trust agreement. Different estate
planning attorneys have different opinions on the preferred way to do it but,
in most jurisdictions, either approach generally works.
[25] If you have children or parents—or know anybody who
does—is this really a surprise? It’s
human nature to believe we understand the best way to allocate resources for
our own benefit better than anyone else, including our parents.
———
Notice: While all
information in this work is intended to be factual and correct, errors may
appear (if so, please bring them to the author’s attention via e-mail at joe@generoworks.com). Nothing in this work constitutes legal, tax,
or financial advice, nor should it be construed as legal, tax, or financial
advice to any individual or organization.
To determine how information mentioned in this piece might apply to or
affect your specific circumstances, consult with your own independent
professional legal, tax, or financial advisor. Opinions expressed are those of the author and
not necessarily of any partner or affiliated organization. Reproduction or distribution of this work in
whole or in part is permitted only with the prior approval of the author.
