Donating During Your Lifetime
People who are age 70 ½ or older can contribute up to $100,000 from their IRA directly to a charity and avoid paying income taxes on the distribution. This is known as a qualified charitable distribution. It is limited to IRAs, and there are other exclusions and considerations as well.
There are often major tax advantages to donating retirement assets to a nonprofit as part of an estate plan. When done properly, charitable donations of retirement assets can minimize the amount of income taxes imposed on both your individual heirs and your estate.
When you name a charity as a beneficiary to receive your IRA or other retirement assets upon your death, rather than donating retirement assets during your lifetime, the benefits multiply:
- Neither you and your heirs nor your estate will pay income taxes on the distribution of the assets.
- Your estate will need to include the value of the assets as part of the gross estate but will receive a tax deduction for the charitable contribution, which can be used to offset the estate taxes.
- Because charities do not pay income tax, the full amount of your retirement account will directly benefit the charity of your choice.