What are Charitable Gift Annuities? In this episode of Ask The Hammer, Jeffrey Levine of Buckingham and Robert Powell, editor of Retirement Daily on TheStreet and finStream co-founder discuss Charitable Gift Annuities. This avenue of charitable giving, though not new, is experiencing renewed interest among older IRA owners, thanks in part to changes made by the Secure Act 2.0.

The Secure Act 2.0, passed last year, brought significant updates to retirement accounts and charitable giving. One of the notable changes allows individuals aged seventy and a half or older to use their IRA in a qualified charitable distribution. This permits them to transfer up to $50,000 directly from their IRA to a charitable gift annuity once in their lifetime. Such a move not only qualifies as a qualified charitable distribution but also satisfies the RMDs (Required Minimum Distributions).

But what’s the real allure behind a charitable gift annuity?

The donor, upon transferring the funds, starts receiving lifetime income from the charity. While there’s no immediate tax deduction for this kind of transaction, especially when initiated from an IRA, it does have the advantage of not increasing the donor’s income at the time of the transaction. As Levine explains, the income one receives from the charitable gift annuity will be taxable, but only as they’re received over time.

However, while the appeal is evident, Powell inquires about specific guidelines, particularly on the rate of interest on the payments. Levine notes that these should generally start at at least five percent. Yet, he emphasizes the importance of working closely with a qualified charity to ensure the annuity is structured in a way that benefits both the donor and the recipient organization.

While the particulars of the annuity and its setup may seem complex, charities are well-prepared to help potential donors. Most charities are up-to-date with the changes in the IRA rules introduced by the Secure Act 2.0 and have structured their offerings to accommodate these rules, hoping to attract more donations.

As the discussion wraps up, the experts cheekily point out they’re not a charity but urge their listeners to “donate” by sending in their questions, emphasizing the platform’s goal to address financial queries and help guide their audience.

In summary, the Secure Act 2.0 has breathed new life into an age-old method of charitable giving. For those looking to support charitable causes while also seeking some financial reprieve, the Charitable Gift Annuity, backed by the new regulations, might be the perfect route. However, as always, potential donors should work closely with their chosen charity and perhaps seek financial advice to ensure the best possible outcome for all parties involved.

Watch more episodes of Ask The Hammer on finStream TV at this link: https://www.finstream.tv/videos/ask-the-hammer/