What the Legacy IRA Act Could Mean for You

New legislation passed that permits distributions from an IRA to fund a charitable life income gift. The Senate Finance Committee unanimously passed the Enhancing American Retirement Now (EARN) Act, which is being called "Secure 2.0."

Within the EARN Act is the Legacy IRA Act. Beginning 2023, the Legacy IRA Act permits IRA owners age 70½ or older to make a one-time qualified charitable distribution (QCD) to fund a life income gift, such as a charitable gift annuity, charitable remainder unitrust, or a charitable remainder annuity trust.

This opportunity does come with limitations:

• a donor can make this election in one tax year only,
• there is an aggregate limit in that year of $53,000, per taxpayer (this amount counts against the overall $105,000 annual limit per taxpayer applicable to QCDs for outright gifts made that same year),
• all gift annuity payments will be fully taxable as ordinary income,
• the annuitant(s) must be the donor and/or the donor's spouse,
• annuity payments must begin no more than one year after the date of gift and must be at least 5% of the QCD amount,
• the QCD counts toward the donor's required minimum distribution for the year,
• and there is no charitable deduction.

The Act introduces an annual adjustment for inflation of the $53,000 limit described above and the $105,000 annual limit on QCDs used to make outright gifts, starting after 2023.

The bill also raises the age at which the owner of an IRA or other qualified retirement plan must start taking requirement minimum distributions (RMDs). It increases this age from 72 to 73 for individuals who turn 72 after December 31, 2022, and turn 73 before January 1, 2033. It increases this age to 75 for individuals who turn 74 after December 31, 2032.

Please note: this change DOES NOT affect the required minimum age for making a QCD. That age remains 70 ½.

If you would like to discuss making a charitable gift from your IRA, or to receive a personalized illustration of how a life income gift could benefit you and UNC Charlotte, please call 704-687-0301 or email [email protected] for more information.