Larry Katzenstein, AB ’69, is a nationally recognized authority on estate planning and planned giving, advising charitable organizations both locally and nationally. He also earned a juris doctoris degree from Harvard University in 1972. He serves on the American Council on Gift Annuities board of directors, is a fellow of the American College of Trust and Estate Counsel and a member of its Charitable Planning and Fiduciary Income Committees, and has served as a member of the advisory board of the New York University National Center on Philanthropy and the Law. Larry is a former chair of the American Bar Association Tax Section Fiduciary Income Tax Committee, appears on several American Bar Association-American Law Institute estate planning programs, and has spoken at national tax institutes, including the Notre Dame Tax Institute, the University of Miami Heckerling Estate Planning Institute, and the Southern Federal Tax Institute. Larry has served as an adjunct professor at the Washington University School of Law where he has taught both estate and gift taxation and fiduciary income taxation. Larry was named the St. Louis Non-Profit/Charities Lawyer of the Year in 2011 and 2015 and the St. Louis Trusts and Estates Lawyer of the Year in 2010 and 2013 by Best Lawyers® (by BL Rankings). He was nationally ranked in the 2009-2022 editions of Chambers USA for Wealth Management (by Chambers & Partners).
Larry is the co-author of the Bloomberg Tax Management Portfolio Charitable Remainder Trusts, Charitable Gift Annuities, and Pooled Income Funds. Larry is also the creator of Tiger Tables actuarial software, which is widely used by tax lawyers and accountants, as well as the technical advisor to NumberCruncher software.

Contact the Office of Planned Giving for more information about making a gift from your IRA or creating a life income gift.

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In 2015, Congress made IRA Qualified Charitable Distributions permanent, and now SECURE Act 2.0 makes them even better. 

A little background:  The IRA qualified charitable distribution (“QCD”) allows an individual who has attained age 70 ½ to direct distributions of up to $100,000 from his or her IRA ($105,000 beginning in 2024) directly to one or more charities. The distribution must be made to a public charity and cannot be made to a supporting organization or certain other types of charities. Note that under current law, IRA account holders are not required to take IRA distributions until the year they reach age 72, or 73 if the account holder reaches age 72 after Dec. 31, 2022, but a QCD can be made if the account holder has attained age 70 ½. The distribution is not deductible as a charitable contribution deduction, but the distribution does not go into the account owner’s income either. It is as if the donor received the income and was able to deduct the entire amount as a charitable deduction, resulting in a wash. 

Because the QCD doesn’t go into the donor’s income at all, the income of the taxpayer is reduced which may have further beneficial tax effects, such as lowering the taxability of social security benefits.  Even better:  the QCD provides income tax savings even if the taxpayer does not itemize deductions but uses the standard deduction, which for 2023 is up to $28,700 for a married couple where both spouses are over 65. QCDs have become so beneficial because many people no longer itemize their deductions now that state and local taxes are only deductible up to $10,000, even for a married couple filing jointly, and many older individuals no longer have a home mortgage deduction. So, especially for these taxpayers, the ability to use the QCD is an even more valuable tool for charitable giving. 

So what is new with SECURE Act 2.0? Now not only will the $100,000 limit on QCDs be indexed for inflation in future years, but as much as $50,000 of a QCD can be directed to a charitable remainder trust (“CRT”) or charitable gift annuity (“CGA”). This can be done only once, the payments must begin within one year, only the account holder and spouse can be income beneficiaries, and the CRT or CGA cannot accept other assets. Again, as with an outright distribution, no charitable income tax deduction will be available, but the distribution to the CGA or CRT will not be included in taxable income until distributed by the CRT or QCD. Unfortunately, the limit of $50,000 makes distributions to CRTs in many cases impractical.  However, if each spouse has a separate IRA, each can contribute up to $50,000 to a single CRT for the benefit of the couple. The CRT can provide for annual payments to the beneficiaries for the rest of their lives of a fixed amount or a percentage of the fair market value of the trust assets, typically 5% or 6%. Although the distributions will be entirely taxable as ordinary income, the rollover may reduce what must be included in income annually by further stretching out the taxability of the payments, especially for older taxpayers. At the donor’s passing, funds will pass to charity and support the donor’s charitable missions.

If the $50,000 limit makes a distribution to a CRT impractical in some cases, a distribution to a CGA is a good alternative since these are typically issued by charities for contributions as little as $5,000 or $10,000. A CGA can be issued for one or two lives and the amount of the annuity is age-based, with older donors receiving a larger annuity than younger donors. Most charities issuing gift annuities follow the maximum annuity rates suggested by the American Council on Gift Annuities. As with distributions from a CRT, the income received from the CGA will be entirely taxable.

For QCDs to CRTs and CGAs, certain rules apply. As noted, all of the income will be taxable when received from the CGA or CRT, and distributions will only be permitted to the IRA owner or the owner’s spouse. 

So the QCD, either outright to charity or to a CRT or CGA, should be top of mind for anyone now required to take IRA distributions who also wishes to support charitable organizations.