This may be a bit off-topic for estate planning, but I think it’s important to address. This article in the Harvard Business Review is worth the time to read.
Teepa offers insight and the Positive Approach and Beth and Corrie demonstrate how things could be different for all involved.
As you have almost certainly heard by now, the SECURE (Setting Every Community Up for Retirement Enhancement) Act was signed into law on December 20, 2019. As its name suggests, this law is focused on issues related to retirement planning. The provisions that are especially noteworthy in the context of charitable planning include:
QCD Age Unchanged. While the age at which required minimum distributions must be taken has been increased from 70 ½ to 72, the law does not change the age for eligibility to make a qualified charitable distribution (QCD) from an IRA account to a charity. Your clients can still make a QCD after age 70 ½. While this is good news for taxpayers who like the ease of QCDs for their charitable giving, it is important to note that this change may affect the analysis of tax benefits to the taxpayer since they no longer have an RMD that would require tax be paid upon withdrawal.
Alternatives to Stretch IRAs. Most non-spouse IRA beneficiaries can no longer elect to stretch their distributions from their inherited IRA over their lifetime, a commonly used planning tool referred to as the stretch IRA. Clients with large IRA accounts who were hoping to maximize the tax-free appreciation period for their heirs may be interested in alternative planning tools that will help them achieve similar goals. Your charitably inclined clients may wish to consider creating a testamentary charitable remainder trust. Since a CRT is tax-exempt, it can receive IRA account assets without tax being due up front and additional appreciation of the assets will similarly be tax-deferred. Similar to an IRA, the beneficiaries are taxed as payments from the trust are received over their lifetimes. Whatever is left in the trust after the beneficiaries’ deaths will then go to a charity named by the trustor.
Please let us know if you would like to see gift proposals or illustrations for a client’s testamentary charitable remainder trust. We are happy to partner with you in exploring options and creative solutions for your clients’ estates. Please contact Rebecca Bibleheimer at (503) 944-2124 or email@example.com at Oregon Community Foundation.