More Than Just Income

Clients can begin making qualified charitable distributions from their IRA when they are 70½ years old.

In last month’s blog post, we discussed the role life insurance can play in your clients’ charitable giving plans. While life insurance does support multiple charitable giving strategies, it is not the only multi-purpose tool available. Retirement accounts also can support your clients’ lifetime and legacy giving plans.

IRAs can support lifetime giving

If your client has other resources to cover their living expenses, their IRA could be used to make charitable gifts during their lifetime by using qualified charitable distributions (QCDs). In 2025, the maximum annual amount an individual can distribute in QCDs is $108,000.

Distributions must meet certain criteria to qualify as QCDs:

• The IRA owner must be at least 70½ years old at the time of the distribution.
• The distribution must be made to a qualifying 501(c)(3) organization, or a qualifying fund at a 501(c)(3) organization.
• The distribution must be made directly from the account custodian to the qualified charity or fund.

In addition to helping clients meet their charitable giving goals, QCDs can also provide additional benefits:

• Since QCDs are excluded from a client’s taxable income, they can be a great way for clients taking the standard deduction on their tax returns to receive a benefit from their charitable giving.
• Despite being excluded from a client’s taxable income, QCDs do count towards satisfying a client’s required minimum distribution amount.
• Since making QCDs reduces the value of a client’s IRA, giving through QCDs during a client’s lifetime could help them minimize the size of their taxable estate, potentially reducing estate taxes and leaving more for heirs.

Legacy gifts using IRAs and other retirement accounts can be effective too

Many clients’ estate planning goals include both charitable giving and bequests to their loved ones. When developing an estate plan that includes both charitable and non-charitable beneficiaries, remind your clients that the type of assets you leave to each group can make a difference.

Public charities typically do not pay income tax on the donations they receive. However, funds your heirs inherit from a traditional IRA or qualified retirement plan must typically be included in their taxable income, while any life insurance proceeds they receive are typically excluded.

If your client can purchase sufficient life insurance , designating their heirs as beneficiaries of that policy may be more tax-effective than leaving other assets to them. Your clients can then use those other assets to support their selected charities, as long as those organizations are able to accept and manage those assets.

Need additional assistance?

If you or your clients have additional questions about making gifts to MCF, we would be happy to help! Alison Helland, Director of Donor and Advisor Engagement, can assist you or refer you to another member of our Donor Engagement team to serve as a resource for your specific situation. You can reach Alison via email at ahelland@madisongives.org or via phone at 608-446-5937.