IRAs may not be the very first thing that comes to mind when you and your colleagues implement fundraising strategies. But they probably rank in the top three! That’s because Americans who have spent decades in the workforce have watched their 401(k)s, IRAs, and other retirement accounts grow, making retirement accounts a significant part of many donors’ wealth and, in turn, their charitable plans.
Retirement accounts also create plenty of confusion around charitable giving. Here is the most important point: Donors’ retirement assets can play a role in charitable giving in two very different ways. One happens during a donor’s lifetime. The other happens at death.
You don’t need to become a tax expert on either technique. But knowing the difference can help you recognize an opportunity and encourage a donor to talk with tax, financial, and estate planning advisors.
Opportunity #1: Giving from an IRA during life
A donor who has reached age 70½ may be eligible to make a Qualified Charitable Distribution (QCD) directly from an IRA to an eligible charitable organization. The opportunity begins at 70½ even though Required Minimum Distributions (RMDs) generally begin at age 73 or later, depending on the donor’s birth year. (The different IRS age thresholds for QCDs and RMDs are, understandably, a common point of confusion.) For 2026, the annual QCD limit is $111,000 per taxpayer. And for donors who are already subject to RMDs, a qualifying QCD can count toward the RMD.
So why should your donors care? Unlike a conventional charitable contribution, a qualifying QCD generally is excluded from taxable income rather than claimed as a charitable income tax deduction. That can make a QCD an attractive way for eligible donors to use IRA assets to support your organization, and it’s important for donors to follow the steps carefully and be aware that the process is complex.
So what’s your organization’s role when you’d like to spark a donor’s interest in supporting your mission through a QCD? First and foremost, don’t give the donor tax advice. Simply recognize the opportunity. If a donor over age 70½ mentions an IRA, an RMD, or interest in exploring a tax-efficient way to make a gift, consider saying something like: “We’re working with other donors who are using their IRAs to make charitable gifts. It would be worthwhile to ask your tax advisor whether a Qualified Charitable Distribution from your IRA to support our organization could make sense for you. I’ll forward a link to information on our website that you can pass along to your attorney, CPA, or wealth advisor.”
Opportunity #2: Leaving retirement assets to a charitable organization at death
Legacy gifts of retirement accounts are sometimes confused with QCDs. A donor absolutely can use retirement assets to fulfill a charitable gift through an estate plan, but the mechanics and rules are quite different from the mechanics and rules for a QCD.
The way this works in a legacy situation is that a donor names your organization as the beneficiary of all or a percentage of an IRA or other retirement account. This is not a QCD. There is no age-70½ requirement, and the gift does not occur during the donor’s lifetime. Instead, your organization receives the assets after the donor’s death. What’s more, these legacy gifts via a beneficiary designation are not limited to IRAs. Other retirement accounts, such as 401(k)s and 403(b)s, can be left to a charitable organization upon the owner’s death via beneficiary designation.
Retirement accounts can be particularly attractive assets for charitable estate planning. That’s because traditional retirement assets left to individual beneficiaries may carry income tax consequences, while a tax-exempt charitable organization generally does not pay federal income tax on retirement assets it receives for its charitable purposes.
The mechanics of a legacy gift are relatively straightforward. A donor typically can name your organization as a beneficiary by updating the retirement account’s beneficiary designation rather than changing a will or revocable trust. Of course, beneficiary designations should be fully coordinated with the donor’s overall estate plan and reviewed carefully by the donor alongside legal, tax, and financial advisors.
For your purposes, opening the conversation with a donor might be as simple as: “If you’re thinking about including our organization in your estate plan, it would be a great idea to ask your advisors whether retirement assets are an appropriate way to accomplish that goal.”
Don’t mix the two
This is the distinction we hope you’ll remember:
During life: An eligible donor age 70½ or older makes a QCD directly from an IRA to a charitable organization.
At death: As a part of a legacy plan, a donor names a charitable organization as a beneficiary of an IRA or other retirement account.
A donor might use one strategy, both strategies, or neither. For instance, a donor could make QCD gifts to your organization for years and also name your organization as an IRA beneficiary. Or a younger donor who is nowhere near “QCD age” could include your organization in a 401(k) account beneficiary designation right now.
One more thing to keep on your radar: Congress is considering bipartisan legislation that could expand QCD opportunities. The Charity Parity Act would allow eligible donors to make QCDs directly from certain employer-sponsored retirement plans, such as 401(k)s and 403(b)s, rather than limiting QCDs to eligible IRAs. Stay tuned!
As always, the community foundation is happy to be a sounding board! We are honored to work with many organizations in our region, whether through endowment funds established at the community foundation or other ways we work together to help transform donors’ charitable intentions into thoughtful plans for impact.
