1. Increases the required minimum distribution (RMD) age
The new law increases the age retirees must begin taking taxable withdrawals to 73 in 2023 and 75 by 2033, up from the current 72. It does not, however, increase the age an IRA owner can take a qualified charitable distribution or QCD. That age remains at 70½ years.
How this affects donors:
Simply put, extending the RMD age gives individuals more time to save. They will enjoy additional tax-free growth. It also can be significant if they do not want to begin withdrawing retirement funds during an unsettled economic climate, giving them more time for their stock portfolio to recover.
2. Adjusts for inflation the $100,000 annual limitation on direct gifts to qualified charities from an IRA
The $100,000 cap for QCDs that has been in place for over a decade will finally increase annually for inflation.
How this affects donors:
Retirement plan assets are one of the largest percentages of an individual’s wealth. This new law allows individuals to increase their giving and ensure their giving keeps pace with inflation. And they can make an impact—and see that impact—now rather than after their lifetime.
3. Allows for a distribution from an IRA to fund a life-income gift
A huge win for the nonprofit community. This is a one-time election for a qualified charitable distribution from an IRA to be made to a split-interest entity. The distribution of up to $50,000 could be made to a charitable gift annuity (CGA), charitable remainder unitrust, or charitable remainder annuity trust.
Many seasoned professionals from the nonprofit community feel that this will substantially increase interest in CGAs.
How this affects donors:
These types of life-income gifts allow IRA owners to make a gift to a qualified charitable organization and receive lifetime payments to boost their retirement income or provide a lifetime payment for a spouse, family member, or another beneficiary.
2023 Is the Year of the CGA
The CGA just hit a trifecta that will make it the leading nominee for the best-planned gift of 2023. Earlier this year, the American Council on Gift Annuities increased gift annuity rates not once but twice, making rates the highest they have been in over a decade. And now, Congress gave the nonprofit community a year-end gift allowing an IRA owner to make a one-time election to make a QCD to fund a CGA.