Welcome back to the Great Retirement Debate. So what's on the agenda for today, Jeff? Yeah. Good to be back with you. So today, we're going to discuss the question. Should I give my IRA to charity? Why would you do that? That's a good question. That's what we're gonna discuss. That's the whole point of today, man. Are you just gonna give your whole retirement account to charity? Well, I think you bring up a good point, which is, if you're not charitably inclined. Exactly. The answer is always going to be no. Let me expand on that because people talk about charitable maneuvers, especially with IRAs. No question. I think we both agree. The best asset to give to charity IRAs. They load it with taxes. You're gonna give the charity. It's a good one to give. Yeah. But people talk about charity. I would never say give to charity for tax purposes because you have to give the asset away. There's no benefit if you're giving everything away. If you didn't really want to give to charity. So what Jeff said I agree with, this is for those who are charitably inclined. Charitably inclined means you're giving to charity anyway. If you're giving IRS are the best assets to give, and we're going to cover two parts during life through qualified charitable distributions, and to leave to a charity at death, maybe through a charitable remainder trust. So I I I think, you know, said differently. You can't end up with more money in your pocket by giving you money to charity. Whatever tax break you might be entitled to is not going to account for the more not not going to more than make up for the fact that you've given away money to charity. Now if you're charitably inclined, you don't care. Now certainly wanna do so in the most efficient way because it either allows you to give more or to have it cost you less because you're not paying as much in taxes, but there's no There's no way to give to charity one dollar to end up with a dollar and twenty cents in your pocket. Right. But there are a lot of promoters out there. Let's say you can do all these things and get all these deductions and things like that. So let's go back to the law the way it is now. Most people who do give to charity, and that's the ones we're talking to. Mhmm. Get no current tax benefit for their gift. You get a good benefit because you feel good about giving to charity. But ever since the law changed years ago, there is no generally no tax benefits. And specifically, when you say the law, you're referring to the fact that the standard deduction now is is is very large. Right. So for instance, a married couple can can give roughly work. They need more than, like, thirty thousand dollars for five months deduction. To Yeah. To be able to do that. And you only get ten thousand dollars for state and local taxes now. Right. So what else are these And most other mis miscellaneous itemized deductions are not there. The bottom line according to IRS, ninety percent of people take the standard deduction. So there's no longer an itemized deduction available for your gifts to charity, unless you're giving, you know, dramatically large sums. Yep. Yep. Exactly. I was gonna say if you're winning one of those ninety percent, you take the standard deduction, no income tax benefit for your gift to charity. So let's talk about, assuming you're charitably inclined, what's the best asset to give? Well, your IRA, as we say, One of the best way I think it's one of the best provisions in the tax code, qualified charitable distributions we call QCDs. The only downside is that it's not available to enough people. It's available only to IRA owners, and believe it or not, IRA beneficiaries who are seventy and a half years old or older and only available from an IRA. In the way it works, it's a direct transfer from your IRA to a qualifying charity. You know, I had a really important point. I was actually just listening to a webinar recently where it was stated incorrectly they said, yeah, IRA owners or their beneficiaries if the IRA owner was seven and a half. It's not the IRA owner. It's when the beneficiary gets it, and you said this, but just to reiterate, the beneficiary themselves has to be seventy and a half year old in order to be able to make that qualified charitable distribution. And I'm with you in general. And I love QCDs for individuals who are charitably inclined. I don't think there's a better way to give away money Sometimes I hear people say, well, what about appreciated stock instead? Because they're thinking, well, I I kinda get out of the capital gains. Right. Right. A, to your point earlier, you probably are not getting the benefit because you still have to give away enough to get a a itemized deduction. And, b, remember with a appreciated asset, if you hold on to it long enough. At death, right? There's a step up in basis. Tax has gone anyway. But with the IRA, there's not ever a point where you get rid of the tax. If you're in the IRA, you're going to owe the tax on it unless it ends up going to a charity via QCD or left to the charity after death. So I think it makes a a much better asset. I do too. For another reason, though. There's no nice way to say it, but highly appreciated stock is a great benefit if held to death for step up and basis. People who qualify for a QCD. You hit the same thing I was going to. Yes. Have to be at least seventy and a half. So there's no nice way to say it, but their they don't have fifty year life expectancies. Yeah. Yes. Let's just just face that. That's not gonna be the case. If you're that close to the and, you know, people live to a hundred. I'm just saying the older you are, the more you wanna hold on to that till death. Absolutely. The older you are, the more the QCD makes sense. But even for the the typical seven and a half year old, you should almost be, like, looking forward to the day when you hit seven and a half so that you can make those QCDs. And one and one other ancillary note that that you know, only will affect folks in that first year. So I don't wanna spend too much time on it, but I do see a lot of mistakes. You know, we talk about, used to be RMDs used to start at seventy and a half. Oh, right. Right. And if you turn seventy and a half, let's say, on December thirtieth of the year, which, by the way, everyone is the last day you concerned seven and a half. There's there's no turning seventy and a half on December thirty first, no June thirty first of airsuit. But let's say you turn seventy and a half on December thirtieth. Well, you only have two days in which you can make a QCD. You must actually be that age. So if you turn seventy on June thirtieth of the year, you turn seventy and a half December thirtieth. You have two days in that year. You can make the QCD. December thirtieth and December thirty first. And, boy, you better hope those are not Saturday and Sunday. Yeah. Right. The way I usually tell people, because they don't you're right. That's a confusing thing for because for other purposes like RMDs, it's just the year you turn seventy and a half. So the way I say it to people, if you turn seven if you turn, seventy and a half if you turn seventy and a half tomorrow, you don't qualify today. That's exactly right. Now with with the QCD, I think it's a great great thing, but I also think that there are potential traps and downsides to QCD, especially with some of the new changes that were introduced. So as part of Secure Act two point o recently Ed, used to be that the only place a QCD could be made was directly from the IRA to a qualifying charity, but Secure Act two point o opens up a a three new options for folks and to split interest entities, which means you get a little bit of a benefit when charity gets the money, and charity gets a little bit of benefit the three are, qualified, excuse me, a charitable gift annuities, a charitable remainder trust and a charitable remainder annuity trust. So charitable remainder unit trust, crut, charitable remainder, annuity trust, Crat, and a charitable gift annuity. I don't know why anyone in their right mind would make a crut or a Crat. Right. I agree. Because it has to come from the the only funds that can come in there, from the IRA. That's right. And you're limited to fifty thousand, although for this year, it went up through inflation. Twenty twenty four, fifty three thousand. So the best option is the charitable gift annuity, but again, lit limited to the fifty three thousand and you get an income back. You know, I just saw an article, and that a couple of months ago, somebody was writing about it, but I went to the comments. I always look at the comments, like, especially in the Wall Street Journal, somebody said, oh, it's such a lousy return. That's not what you wish. They said, I could do better than that. You know, you you get a five percent return because there is an income element back, but that's not why you're doing it. Again, you're doing it because you want to gift a charity, but with a charitable gift annuity, you get a little back. Yeah. And there's no the difference between the biggest difference between the charitable gift annuity and those other options we talked about, the the cruts the crats. The same limits of fifty three thousand apply to that. Right. But if you're creating a crut or a crat, either one of those trust vehicles The best you could do is have a husband and wife or a married couple who are each putting in fifty three thousand dollars because the only beneficiaries can be the IRA owner and their spouse. So if you have one trust, which gets a hundred and six thousand dollars, it just doesn't pivot to grant trust. Yeah. Yeah. Yeah. And every year, you're gonna have tax returns and it it just it is not worth it. But the charitable gift annuity is run by the charity. There's no cost of it. Right. I was just gonna say, you know, the hundred thousand are now a hundred five thousand of the QCD. That's an annual limit, but the fifty three is a lifetime limit. That's right. So if you have a that, again, that married couple, you put in fifty three each. A hundred and six. You're done. There's nothing else you can add. And, you know, run across still people say, well, I have a credit already. I'll just put it no. You won't. It's not a QCD. It's only a QCD if the only money that goes into that crut or crat is the QCD money itself. So I think we agree on this that should you leave or should you give your ira to charity the answer is if you're gonna give during lifetime and you're seventy and a half or older, The answer is probably yes. Plus, you get the money out. You start bringing your IRA balance down at zero tax cost. Now it's true. You don't get a charitable deduction because you say you're using the standard deduction, and you can't double dip. You can't go both ways. But Even though you're missing out on, say, an itemized deduction, the QCD is better than a deduction. It's an exclusion from income. Which reduces AGI, adjusted gross income. And it can offset if it's done in the right order in RMD. Plus, you have this little gap period that Jeff talked about for seventy and a half to seventy three, where you can start lowering your IRA balance before RMDs even begin. Mhmm. Absolutely. Yeah. And and, you know, you hit on the AGI number. Even in the best case scenario, when you get an itemized deduction, it's a what they call below the lines that happens after AGI. But with the QCD, you not only help to keep taxable income low, but also AGI, and all the things that are key to that. So, you know, think about everything that's tied to AGI. How much of your Social Security is taxable? Almost every credit that gets phased out as income goes higher is keyed to AGI. Even how much your Medicare and Right. Part B and Part D premiums will be two years in the future is key to AGI. So, alright. We're we're pretty settled. QCD. It's a great provision. Fantastic during last time. We'll always save you taxes in pretty much every case. Alright. So what about after debt? Alright. Let's switch after debt. We said IRAs are the best assets to give to charity because they'll with taxes. That goes during life, like we just covered, and after death. If you are giving to charity, if that's your plan, to leave some money to char leave the IRAs. People make this mistake all the time. Sometimes I'll see look at their wills and something And you'll see, oh, I I'm giving ten thousand dollars to my alma mater or something like that. I said, why would you do that? If I tell them reverse the bequest instead, by the quest, of course, you mean what you're giving to someone at death. Right? Right. Right. So instead, give ten thousand of the IRA to the charity That leaves more money for your beneficiaries, that are not IRA money less tax for them. And you can do that. You can leave it directly to a charity or a trust, a charitable remainder trust that pays income back to your beneficiary. The only thing I would say about that. If you're going to do that, and again, you're only doing it. I think we said it ten times. If you're terribly inclined, you get an income interest the IRA at death goes to the, CRT, the charitable remainder trust the pace, income to the beneficiary. But what I worry about there And maybe the family's not worried about it because they wanna give to charity. They have plenty of money, but I worry about if that beneficiary dies early, all the funds go to the charity. So I usually advise coupling it with a life insurance policy on that beneficiary. If he dies early, the funds go to the charity and then at least some of that or maybe more so is replaced with life insurance. That's the option where if you wanna kind of help out your beneficiaries, your children, your grandchildren, whoever that may be right now. And then when they die, then the rest would end up with charity. Right? Right. Okay. Alternatively, if you're just leaving the the money to charity, the best thing probably to do is just to actually name charity on the beneficiary's form. Right? Right. But some people want an income interest. That's what you can get with the CRT. The only thing with that is, some people are using it when they killed the stretch IRA Mhmm. As, a semi stretch. It's just a stretch. Yep. Yeah. Simulate a stretch IRA where the beneficiary would get a certain amount. Each year for the rest of their lives. But you you have to know what's right for your family. The beneficiary just can't take an extra lump sum if they need more, you know, they're stuck. But some parents like that to control it. It's almost like a forced stretch if you don't. Right. So a lot of reasons to look at leaving an IRA to charity after death. But There also can be some traps with that. Right? Well, I didn't know if you're gonna go there because it's such a Oh, I went there, Ed. I went there. Alright. So thanks to now we're going back to secure OG. That's what we're calling. The original secure act. Years ago, before that, in the, mesozoic area, whatever era, whatever we're calling that. It used to be that after seventy and a half, you could no longer contribute to a tax deductible IRA. Is that where you were going with this? Actually, I was gonna go with the the pecuniary request issue as Oh, I wasn't even going there because okay. You know where I was going with this? Yes. Yeah. Sure. Going with the idea that that's put too. That is a bigger mess. Yeah. The idea that if you contribute afterwards, you almost have to to get rid of your bad ugly after seven and a half contributions Yeah. Yeah. Before making a QCD. You know, somehow in a secure act, they made a provision that took a great provision. You know, it's a solution, problem looking for what's it saying, looking for a solution. Solution looking for a problem. Yeah. The other way. Whatever it was. Strike that reverse kinda like Willie one. What what is the right thing? It's a solution looking for a problem. So you could actually end up with a taxable QCD. So the bottom line is Don't take tax deductible IRA contributions if you're working past seventy and a half and do a QCD. But if if if we're talking about after death, Yeah. There may be a a trap that some people could fall subject to. Right? Right. It's called a pecuniary request or a certain dollar amount quest. So you have to be careful that the funds go right to the charity. You cannot satisfy it. Let me put it a simpler way. A peculiar area of bequest, like a a bequest, a dollar amount bequest, like I talked about before. You have a ten thousand dollars, you say, and you will. I'm leaving to my alma mater. If you fund that bequest with an IRA, that's a that's a tax trap because the government treats it or the tax law treats it as cashed out that IRA and gave them the money and it creates a tax. You know, a lot of people, though, they don't understand that. They say, but if I I gave them it, you know, if I if if, my will says give ten thousand dollars to my alma mater. And I took ten thousand out of my ira, and I gave it to my alma mater. Don't doesn't my won't my will, won't my estate get a ten thousand dollar tax deduction? No. It won't unless you say give ten thousand of my IRA to the charity. So it has to be just to be clear, no dollar amount. You don't wanna leave a better yet. It it'd be better to just leave a percentage of your IRS. And name the charity directly. Best thing is like you said before, if this is what you wanna do, name the charity directly on the beneficiary form. Sure. And if you're you're worried about, well, I I don't wanna mix accounts, you can always create a separate IRA. Right. That's what I tell people. And put ten thousand dollars in it and name charity, the hundred percent this year of that account, and life is very simple. Well, the bottom line is if you're charitably inclined, like a lot of people watching, Use your IRA. The only loser is Uncle Sam. Everybody else wins. Yeah. You know, we call this the Great Retirement Debate, Ed, but there's too much debate about that. Not this one. If the hundred percent pretax asset can be given to charity, it's almost always the way to go. That's right. Alright. Well, what do you think? Do you think it's a good idea to give your IRA to charity during life after death? What are your thoughts? Let us know. You can reach out to us, Ed, @TheSlottReport on Twitter or myself @CPAPlanner.Look forward to hearing from you, and Ed, I look forward to our next Great Retirement Debate. Yep.