Retirement, the great wealth transfer, and your clients’ charitable plans

The Community Foundation for Greater Atlanta looks forward to working with you and other tax and estate planning advisors as you help your clients navigate the unprecedented wealth transfer of an estimated $84 trillion from baby boomers and the silent generation to their descendants over the next two decades. 

This historic shift presents a unique opportunity for advisors to discuss charitable giving plans as a strategic and impactful component of estate and financial planning. As your clients retire and start planning their charitable legacies, pay particularly close attention to IRAs and other retirement plans as key components of a philanthropy plan.   

You’re likely aware that retirees can use Qualified Charitable Distributions (QCDs) from traditional IRAs to both fulfill philanthropic goals and manage tax burdens. As your retiring clients reach the age (73) when required minimum distributions (RMDs) are mandatory, the RMDs can trigger significant taxable income. QCDs offer some potential relief by allowing IRA owners aged 70½ or older to transfer up to $108,000 per year (2025 limit) directly to qualified charities, including certain funds at the Foundation, thereby satisfying RMD requirements while keeping the distribution out of the donor’s adjusted gross income. This approach not only reduces income taxes but can also help moderate Medicare premiums and the taxable portion of Social Security benefits, and is available to all eligible taxpayers, regardless of whether they itemize deductions.

But the benefits don’t stop there! Beyond immediate tax benefits, QCDs can play a strategic role in long-term estate planning. Here’s why:

–Traditional IRAs can leave heirs with a substantial tax bill because inherited IRAs must generally be depleted within ten years and are taxed as ordinary income. 

–By directing RMDs to charity through QCDs, your high-net worth clients can gradually reduce the value of their IRAs, thereby reducing their future potential estate tax burden. 

–QCDs are not subject to the income percentage limits that typically apply to charitable deductions, making them a flexible tool for those looking to balance philanthropic intent with smart estate management. 

–A potential bright spot on the horizon is proposed legislation that would extend eligibility recipients of QCDs to donor-advised funds. This would make it even easier for your clients to integrate their financial and estate plans with the charitable strategies already in place through the Foundation.

By incorporating QCDs into a client’s estate and financial plan, you can help your retiree clients maximize the impact of their giving while minimizing tax exposure for themselves and their heirs. Our team is always happy to help evaluate options for implementing the charitable components of your clients’ estate plans. Please reach out anytime!