Updated: Nov 15, 2022
Did you know that the average age of a donor, across the spectrum of charity work, is mid-60s? That is just a hop, skip, and a jump from the age at which IRA accounts begin to take on great significance in one’s financial life.
All fundraisers should know that at age 72, the IRS requires individuals to take annual Required Minimum Distributions (RMDs) from their tax-deferred retirement accounts. Individuals have to pay taxes on these RMDs (this can even bump them into a higher tax bracket- eek!). What if they do not need the income and do not want to deal with the taxes? Good news! An individual can instead distribute an amount of up to $100,000 a year to charities, removing or reducing the unwanted tax burden that would have been headed their way. This is called a Qualified Charitable Distribution, or QCD.
Here are some simple things to remember about QCDs:
Tax-free QCDs are possible beginning at age 70.5, and take on additional significance at age 72 when RMD’s become a factor.
Funds must come directly from the IRA – a donor needs to issue their QCD by working directly with their IRA custodian, not by writing a personal check.
Donors can distribute up to $100,000 per year via QCDs.
Why is this important to nonprofits? Some of your most loyal donors do not live a lavish lifestyle with large sums of cash available for their philanthropic pursuits, but that may not mean that they are not able to make a significant contribution to you. Educating yourself and your septuagenarian donors about QCDs ensures that you are helping donors achieve their philanthropic goals with maximum impact.
Here are some actions to take now to incorporate QCD fluency and strategy into your development program.
Track age in your CRM and flag donors who are at this stage of life.
Train your frontline staff to be able to confidently discuss this giving vehicle with appropriate donors.
Consider language on your website explaining this option to donors.
Consider an annual mail-piece or newsletter segment referencing this opportunity to the appropriate audience.
At Osprey Strategy Group, we enjoy helping nonprofits of all shapes and sizes incorporate a customized planned giving strategy into their annual development activities. QCD fundraising is one small but important factor, among many. Please don’t hesitate to reach out if you think we can help you with planned giving strategy, infrastructure, training and more!