New laws and tax codes can make planning your estate feel like a monumental task. The MIT Office of Gift Planning’s twice-yearly webinar series aims to illuminate the opportunities around timely topics and engages top experts to answer your big questions about how they affect your finances.

At the May 2023 webinar, “Retirement with Purpose: The Secure Act 2.0,” Brad Bedingfield, partner at Hemenway & Barnes LLP, and Suma Nair, chief fiduciary officer at Fiduciary Trust, discussed the history and future implications of the Secure Act 2.0, which took effect in January 2023. 

One key benefit of this law is the ability to fund an income-generating charitable gift annuity (CGA) or charitable remainder trust (CRT) with a one-time distribution of up to $50,000 from your IRA. The discussion went beyond the Secure Act 2.0 to explore some of the many benefits of making a qualified charitable distribution (QCD) from an IRA.

1. QCD or outright giving? QCDs can have more tax advantages than withdrawing money from your IRA and giving outright. “If you are planning to give a significant amount to charity, it may make the most sense to do a QCD so you can give up to $100,000 without it affecting your adjusted gross income,” Bedingfield says. “Withdrawing those funds outright contributes to your adjusted gross income, which could exclude you from other credits and benefits.”
    
2. You can use more than one IRA to fund a life-income gift. The Secure Act 2.0 does not specify that only a single IRA account may be used to fund a CGA or CRT. The main requirement is that a maximum of $50,000 can be used from the IRA(s) to fund the gift in the same fiscal year, and it can only happen once. For example, if a married couple wishes to establish a $100,000 CRT at MIT (the minimum amount needed), they could use $50,000 from one spouse’s IRA and $50,000 from the other spouse’s IRA in the same fiscal year.
    
3. Consider transferring assets from other accounts to an IRA. The tax savings on QCDs and the opportunity to fund a life-income gift with an IRA make them an attractive option for charitable giving. “If you want to take advantage of that, you can convert part of your 401(k) or 403(b) into an IRA so you can take advantage of those tax-free distributions,” says Bedingfield.
    
4. Stay flexible. “You can do a lot of irrevocable planning, but don’t do it without flexibility,” says Nair. “Tax tails shouldn’t wag the dog. At the end of the day, you have to do what’s right for you and your family in your circumstances.”

As always, the MIT Office of Gift Planning is available to answer your questions. Contact us today to start the conversation. 

This information is up-to-date as of August 2023. Information in the Corridor newsletter should not be considered legal or financial advice. We encourage you to discuss these options with your advisor.