What is a Qualified Charitable Distribution (QCD)?
- The “IRA charitable rollover” provides an annual exclusion from gross income up to $100,000 for Qualified Charitable Distributions (QCDs) from an IRA.
- Donors age 70-1/2 and older can transfer up to $100,000 from their IRA to qualifying charities each year.
- The amount transferred may be used to meet the donor's required minimum distribution.
- The donor establishes a non-advised fund and selects charities that will receive annual grants from the fund, either for a term-of-years or in perpetuity. In order to qualify for the QCD, the donor may not maintain any advisory capacity over the fund once it’s established (i.e. they may not add or remove selected charities, or change the distribution plan).
- QCDs from may be directed to the non-advised fund, or can be used to pay premiums on gifts of life insurance with proceeds directed to the fund upon the insured's death.
How to Establish Your Charitable Fund with Gifts of Life Insurance at InFaith
- Create a Fund online at InFaith, or complete and send the Fund Workbook to InFaith. Be sure to select “Life insurance using qualified IRA distributions” under Give Later in Step 3. Please include a copy of an in-force illustration of the policy if possible.
- InFaith drafts a Fund Agreement based on the charitable intentions of the donor, and sends it to the donor for signature. You, as the financial professional, also receive a copy.
- For new policies, complete the life insurance application with the insured as owner and InFaith as beneficiary. (Donors may also choose to give an existing policy). The initial premium to put the policy in place cannot be paid with a QCD. The donor will receive an income tax deduction for the value of the policy once it’s assigned. After the policy is owned by InFaith, the donor may make QCD gifts to cover any additional premium payments.
- Donor assigns ownership of contract after fund is established. To ensure the donor receives the maximum tax deduction possible for their gift of a new contract, have your client complete and sign Absolute Assignment Form 10AA on the same date as the insurance application.
- InFaith’s tax ID number: 41-1802412
- InFaith’s address:
InFaith Community Foundation
600 Portland Avenue South, Suite 5100
Minneapolis, Minnesota 55415
- The form must be signed by the contract owner in the presence of an impartial witness or notary public.
- Send the insurance application, absolute assignment form and the first premium payment directly to Thrivent.
- The insured retains the contract. InFaith receives premium notices and forwards a copy to the donor as notification that InFaith is waiting on QCD to make payment.
- The donor must request a QCD from their plan administrator and it must be sent directly to InFaith Community Foundation.
- Please notify InFaith when the distribution request has been made, so we can watch for check and ensure it’s applied correctly to the donor’s life policy.
- InFaith will use the gift to pay the premium to Thrivent, and InFaith will send the donor a gift acknowledgement. (The QCD is not tax-deductible, since the donor doesn’t recognize income on the distribution).
Tax and Financial Benefits of Giving Life Insurance
- The donor receives a charitable tax deduction for the gift of the policy.
- Once the policy has been assigned to InFaith, the donor can pay premiums using QCD of any amount, up to $100,000/year.
- The amount directed to InFaith is not included in the donor’s adjusted gross income (AGI).
- Giving these assets to InFaith, versus taking required minimum distributions (RMDs) into income, may enable the donor to avoid certain disadvantages that can come with a higher AGI, such as higher Medicare premiums, self-employment or Social Security taxes, etc.
- There is no income tax due from the donor on the IRA distributions to InFaith.
- As QCDs are not subject to percentage limitations on charitable deductions, they offer an ideal strategy to those who have either exceeded maximum charitable deductions or do not itemize deductions. Since life insurance is typically a non-probate asset, the life insurance proceeds will be paid directly to InFaith, potentially avoiding any delay in payment.
- InFaith will forward premium notices to your client. Your client should request a QCD from their plan administrator payable directly to InFaith, and notify us of the amount being sent and that the gift is intended for the life insurance premium.
- The IRS now requires an independent qualified appraisal for all non-cash charitable gifts of $5,000 or more. These "non-cash gifts" include life insurance made through absolute assignment to a charity, such as InFaith. Please note this ruling only applies to the absolute assigned value of an insurance policy, not the death benefit nor the continuing insurance premium payments made once InFaith is named owner.
- InFaith has retained the services of an independent qualified appraiser to assess insurance gifts valued at $5,000 or more. This may be an issue for gifts of existing policies, or new policies with a large initial premium. There will be no out-of-pocket cost to the donor for this service. The donor will experience a reduction of the charitable contribution (and the corresponding charitable deduction) by the amount of the appraisal fee, which is estimated to be $200.
More about Gifts of Life Insurance
There are a number of benefits to giving life insurance through InFaith:
- Donor can name multiple, diverse benefiting charities through one life insurance contract owned by InFaith;
- Donor can give anonymously if that’s their wish;
- Gifts provide ongoing support to charities far into the future. Based on the gift size, a portion of the death benefit may be distributed in a lump sum to one or more charities if that’s the donor’s wish; and
- Your clients can also give an existing contract or designate InFaith as beneficiary to receive all or a portion of a contract’s proceeds. Contact a Gift Planner for more on the benefits of giving insurance in these two ways.
Resources to Support Your Work
- Gifts of Qualified Charitable Distributions Product Sheet
- QCD Seminar Module
- Create Your Fund Online
- Fund Workbook (PDF)
- Financial Professionals Webpage