Uncle Sam’s Planned Giving Bonanza

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At the close of 2015, Congress gave churches and other non­profits a planned giving strategy that is little known but can become a fundraising bonanza. Age seventy triggers the tax code requirement to withdraw required minimum distributions (RMD’s) from qualified accounts (like IRA’s). Contributions were originally made on a pre­tax basis with taxes to be paid later. The RMD recaptures the tax by adding that withdrawal amount to the adjusted gross income base for calculation of that year’s tax bill.

Many who are charitably inclined do not need the RMD to fund their expenses. Most loathe the RMD process. Pay taxes on money you don’t need and put the remainder back in your bank account. That will give you heartburn…annually!

Thanks to the change by Congress, the qualified charitable deduction (QCD) is now a permanent way to direct RMD’s to a charitable organization and avoid taxation. In fact, taxpayers can make donations of up to $100,000 per year as QCD’s. The direct payment to the charitable organization is not included in the adjusted gross income for tax calculation. While the charitable gift is no longer allowed as a deduction, the lowered gross income can reduce taxes in other areas like the alternative minimum tax, the surtax on investment income, and the increase in Social Security premiums for Medicare Part B and Part D. Advice should be sought from the individual or family tax preparer.

A simple form can redirect RMD’s (or greater amounts up to $100,000 annually) to capital campaigns, endowments, or other planned giving campaigns. The annual RMD heartburn can be replaced by the joyous taste of giving. Spread the word. Effective marketing can make this a win-­win for the donor and the recipient.

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Bill Reid is a career banker specializing in wealth management. Prior to his banking career, Bill practiced as a CPA for a national accounting firm and in private industry. He received a B.B.A. in Accountancy from the University of Mississippi and later graduated from the Securities Industry Institute at the Wharton School of the University of Pennsylvania. Bill and wife Jenny are members of the First United Methodist Church in Murfreesboro, Tennessee. Most recently, he served as Chairperson of the Council of Stewards for his home church.

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