Strengthen Charitable Giving Through Retirement Accounts

For many families, Individual Retirement Accounts (IRAs) are not just a source of income. They are also a planning tool, a tax consideration, and in many cases, a way to support a long-term charitable mission. Two methods provide asset streams to fuel funds from IRAs, each with unique benefits: required minimum distributions (RMDs) and qualified charitable distributions (QCDs). While these terms are often mentioned together, they provide distinct strategical advantages in planned giving. RMDs and QCDs may sound technical, but the core issue is simple. One is a required withdrawal. The other is a strategic option that can turn that withdrawal into a meaningful charitable tool. 

Heritage Wealth Advisors Partner, Managing Director of Client Experience Sarah Simmer, CPA, CFP®, CAP® said using RMDs and QCDs from IRAs for charitable giving can be a highly effective tax strategy, particularly for individuals in or approaching retirement who already have charitable intent.  

“Beyond annual giving, IRAs can also play an important role in estate planning,” she said. “Because traditional IRAs are generally subject to ordinary income tax when inherited, they are often less efficient assets to leave to heirs. Naming a charity as the beneficiary of an IRA allows those assets to pass tax-free while preserving other tax-advantaged assets for family members. 

“Ultimately, incorporating IRAs into a charitable giving strategy can align philanthropic goals with thoughtful tax and estate planning.” 

For individuals and families with a strong philanthropic mission, the opportunity is bigger than tax savings alone. It is about aligning wealth with purpose, reducing friction across financial decisions, and building a plan that supports both family goals and community impact. 

What Are RMDs and Why Do They Matter? 

An RMD is the minimum amount a person must withdraw each year from certain retirement accounts once they reach a specific age. These rules generally apply to traditional IRAs and many employer-sponsored retirement plans funded with pre-tax dollars. 

The reason is simple: Those retirement dollars were allowed to grow tax-deferred for years. At some point, the IRS requires distributions so that the deferred income becomes taxable. An RMD is mandatory. If it is overlooked, penalties can be significant. Negative side effects include: 

• Increase adjusted gross income.
• Raise the taxable portion of Social Security. 
• Trigger higher Medicare premium surcharges.
• Push income into higher tax brackets.
• Reduce flexibility in broader wealth and estate planning.

What Are QCDs and Why Do They Matter? 

A QCD is a direct transfer from an IRA to a qualified public charity. It allows eligible individuals to give from their IRA without having the amount included in taxable income, if the distribution meets the rules. 

A QCD can be a powerful option for charitably inclined households because it connects retirement planning with philanthropic intent. It turns a required or voluntary IRA distribution into a tax-aware giving strategy. But QCD’s have an important distinction compared to RMDs: A QCD is not required. It is optional. But a QCD can help fulfill all or part of the RMD requirement. 

QCDs also generally: 

• Must come from an eligible IRA.
• Must go directly to a qualified public charity. 
• Must be made by an individual age 70½ or older.
• Cannot be made first to the account owner and then donated.
• Can count toward satisfying an RMD if the individual is already subject to one.