Put IRA Withdrawals to Good Use

It’s the time of year when many IRA owners who have delayed taking required minimum distributions (RMD) from their accounts realize they have only a short time left to make withdrawals.  Taking the money can be a reminder that the full amount will be subject to income tax.  There is a satisfying alternative, however, and it’s one that can save taxes.  IRA owners who have reached age 70½ can have part or all of their RMD sent directly to charity (up to a total of $100,000). This is called a qualified charitable distribution (QCD).

How do these QCDs save income tax?  Consider the example of Karen and Bill, who must withdraw a total of $72,000 from their IRAs this year, bumping them from the 22% to 24% income tax bracket.  They make gifts to several charities each year, totaling about $10,000.  Even with their gifts and the $10,000 in state and local taxes they are allowed to deduct, they still won’t exceed the standard deduction of $27,000 this year.  Their tax advisor has suggested that Karen and Bill make their charitable gifts from their IRAs. The result?

  • Rather than paying income tax of $15,840—or more—on their IRA distributions this year, they will pay tax of $13,640, a savings of $2,200, even though they don’t plan to itemize.

  • Karen and Bill reduce their adjusted gross income, which may also lower the cost of their Medicare premiums for 2020.

  • They continue to make thoughtful gifts to the charities they support.

QCDs can be given to public charities, not to donor advised funds or private foundations.  They also cannot be used to establish charitable remainder trusts or charitable gift annuities.  Please feel free to contact us if you have any questions about making a QCD from your IRA.

Get Over the Deduction Hurdle

Many taxpayers were dismayed that they weren’t able to itemize on their 2018 income tax return.  A combination of higher standard deductions and limits on some previously deductible expenses reduced the number of taxpayers itemizing last year from about 30% to about 12%.  Gifts to charity remain one of the few ways taxpayers have available to be able to exceed the standard deduction.

Standard Deductions



Joint Return/
Surviving Spouses

Heads of

Married Filling







Over 65


  25,300 (one)





  26,600 (both)










  25,300 (one)





  26,600 (both)








Over 65
& Blind


  26,600 (one)
  29,200 (both)








What are some of the strategies to boost deductions for 2019?

Bunch two or more years’ worth of gifts—Martin and Brenda, both age 67, have a standard deduction of $27,000 this year.  They paid off their mortgage several years ago, so their only other deduction is state income and real estate taxes, which is limited to $10,000.  The couple have been giving $7,500 annually to charity.  If they make their 2019, 2020 and 2021 annual gifts by December 31, they can exceed the standard deduction and save taxes this year.  They save even more if they make their gifts using stock that has gone up in value and that they have owned more than one year. Stock gifts allow them to completely avoid the capital gains tax they would owe if they sold the shares.

Make larger gifts but retain payments for life—George, age 68, has a standard deduction of $13,850.  He’d like to make a larger gift, but doesn’t feel he can part with the income at this time.  He has decided to give $25,000 in exchange for a charitable gift annuity that will pay him $1,325 (5.3%) annually for as long as he lives.  He’s also entitled to a charitable deduction of $7,867 that will help him itemize for 2019.  If George funds his gift annuity with cash, $979 of the $1,325 he receives is tax-free income for his life expectancy.  He could, instead, use appreciated property and save on a portion of the capital gain he would otherwise owe if he sold the stock.

Make a gift from an IRA—Eligible IRA owners—those age 70½ or older—can make their gifts directly from their IRAs.  There is no charitable deduction, but the gift can take the place of part or all of their required minimum distribution, saving them tax they would otherwise pay on the amount withdrawn.

Two Hidden Assets for Giving

If you want to make a significant charitable gift, and aren’t sure what to give, there may be hidden assets you own that could be used.

Life insurance—Many people own life insurance policies that are no longer needed for family security.  You can make a gift of the policy, and be entitled to an income tax deduction.  It’s also possible to have the proceeds pass to a trust that will make payments for life to a person or persons you name before the trust assets are eventually distributed to charity.

U.S. savings bonds—Millions of dollars in savings bonds have reached full maturity and no longer earn interest.  Treasury regulations don’t allow you to give the bonds directly to charity, but you can redeem the bonds and contribute the proceeds.  The charitable deduction for your gift can offset the tax you’ll owe, if you itemize.  Savings bonds are subject to income tax if held until death, but bonds specifically left to charity in a will or living trust completely avoid the tax.

The Role of Wills and Trusts in Estate Planning

A will is the traditional way for you to direct who eventually receives your property.  Through a skillfully drafted will, your attorney can minimize any taxes and other costs that may be payable from your estate.  Your will can also name an executor (personal representative) to carry out the directions in your will and help your family with any of the potential problems (business or personal) that may arise.

A carefully prepared will can provide security for beneficiaries who may not be qualified to manage and budget their inheritance.  A trust in your will can guarantee your beneficiaries all the rewards and advantages of property ownership, with none of the burdens and frustrations.  Trusts are arrangements in which assets are titled in the name of a trustee, who manages the trust assets and pays income to individuals named by you.  You may choose to act as your own trustee, while naming a successor to assume the job if you are no longer able to do so.

The revocable living trust can be an effective estate planning tool for many people, providing privacy for one’s estate, financial management in times of disability, distribution of assets at death and reduced probate costs.  Ownership of your assets will change over to the trust, but you retain the right to change or revoke the trust during your lifetime.

Your will or revocable living trust may be the best way for you to make a thoughtful gift to continue your support to charity.  There are even ways to create payments for life for loved ones before the assets pass to charity.