Dollars & Sense: Qualified Charitable Distributions in an Inherited IRA?

Chris Robinson, ChFC

A Qualified Charitable Distribution, or QCD, can be taken from an IRA or an Inherited IRA as long as the current owner is at least age 70-1/2 or older, not just in the year they turn 70-1/2, but they actually have to be 70-1/2 or older. It does not matter how old the original IRA owner was when they passed away.

Let’s visit the QCD rules. Once an IRA owner is age 70-1/2, they can make charitable contributions straight from their IRA to a qualified charity, which means the charity is a 501(c)(3) organization. The amount for 2024 has been indexed to a maximum of $105,000 per year per person.

The advantage of the QCD is that you are giving away pre-tax dollars. The gift also counts toward your required minimum distribution (RMD). Unless you itemize, most charitable gifts are no longer tax-deductible. So, the QCD is a great way of making charitable gifts in a pre-tax manner.

If you were to take your RMD as income instead of using a QCD, your RMD will count as taxable income. This additional taxable income may push you into a higher tax bracket and may reduce your eligibility for certain tax credits and deductions. It also could potentially increase your Medicare premiums through IRMAA penalties.

Minor Grandchildren Inheriting IRAs

Did you know that when a minor grandchild inherits an IRA, they must use the 10-year rule, which starts the year after death of the IRA owner. Only a minor child, not grandchildren, can take annual stretch payments based on life expectancy while delaying the start of the 10-year rule until age 21.

Have Questions?

If you have questions about IRAs or QCDs, then call or email me, Chris Robinson, the lead advisor at RFG Wealth Advisory in Argyle, Texas, at 940-464-4104. Let’s schedule a time to discuss how a financial plan with RFG Wealth Advisory could reshape your financial future. At RFG Wealth, our fiduciary duty ensures your interests always come first, and we maintain a transparent fee structure for your peace of mind.

Please don’t wait until it’s too late to secure your financial future. Let the RFG Wealth Advisory team be your guide to financial success. Call us today!

Investment advice is offered through RFG Wealth Advisory, a Registered Investment Advisor.