QCD = The Joy of Giving Tax Free

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This is our topic today is to see these are qualified charitable distributions of the joy of giving tax free, but we have you know that whole idea of the of the joy of giving up and just think about recently that God you know so much, as we are in that verse in Genesis, the first thing he said about mankind is that we are made in his image and so different ways I've been thinking recently how we mirror God and that you really really love to do stuff because guess what God really really love to do stuff. And if you think you like giving gifts, you know, guess you really really really does like giving gifts and when you think about the gifts he's given us. Obviously his Simon and so many things that we think about Thanksgiving and we think about it Christmas and so as we see that clearly there is loss in this country to make this beneficial to have the joy of giving. Even for like it's even more joyful because I'm not paying taxes on income that I have received but that based on our generosity. Whether that's to our family through Thanksgiving or hunting through giftgiving or Christmas orcs through our church or even say that Jesus labor love something on some somebody that's taking care of widows and orphans that kind of thing. When that happens and you have joined Matt like one of my favorite things to give to his is the Christian prison alliance right because these are people that bring Christian materials into these people that are incarcerated in like oh my goodness, like how cool is it that you hear hear hear these people getting stuff and so I get a lot of joy out of doing that because I know that these these people will be given life and life abundant. Even if they're in prison and that will end up with God getting more thanks and so it's, like in real life the gift that keeps on giving. This is those people get an abundant life wherever it is that you invest in your own family or if you invest wherever you go is as people get the abundant life in Christ then they to get to be truly generous with kingdom old right and and it causes you know things to keep going on.

So how fun we get to talk about this today. Yeah, I mean this is some key CDs a minute warms my heart to meet clients. I just had one the other day who this gentleman is almost 90 coming to a financial planner for the first time, to some degree.

He is a financial planner because he worked at a bank on a very high position price bonds and things he retired like 30 years ago and he came to me for some specific financial planning. As a result of listening to the show several years and he's already been doing two CDs and he's been doing him because he learned about them on the show I wanted and learned about some of the intricacies of them is very thankful for that. It's a beautiful thing right when we get to see you know fruit from what you do so well and so we all these acronyms were thrown around to CD IRA RMD get on people acronyms basically turn consumers off just so will will try to limit that in most people. IRA is a pretty acceptable term of people know what that is and you know that's what were talking about today as were talking about money that's inside an IRA. So, not inside a 401(k), not inside different other retirement plans or savings I'm talking about specifically money that you have in a traditional IRA which covers a lot of people in this country and a lot of our listening audience and what the government allows you to do with your IRA is they allow you to give directly to a charity qualified charitable distributions which would include the church missions any qualified charity as a 501(c)(3) element that is. And if you give the money directly from your IRA to the charity.

It never shows up on your tax is accurate, it grabs me I may not. I love the concept that I happen to know that there are some few qualifications there are only for starters you need to be 70 1/2 or older so they will know that unemployment well it might apply to your parents.

It might apply to large group in your church of senior citizens. Seniors who most of whom are going to have some form of IRA money which they need to live a lot of them only take minimum distributions from their IRAs because they have to water requires it, so there might be an opportunity in your church to spread the word about this to to your pastor that we should sit down with a group of people in the church of the pastor could or you could and just talk to them about this thing called QC dealer qualified charitable distribution. There are over 70 1/2 you yourself are going to become 70 1/2 or older at some point and so will redo your financial planning are you doing now you can plan to do a good bit here charitable giving in your later years, through your IRA and there's all kinds of applications of this for all kinds of people. He could be for your parents or your grandparents if you're young and they're still living so this is a wonderful program that we can transfer wealth or transfer money that you've never paid taxes on two directly to the charity of the church of the mission or whatever it is that you want to give to.

We can even put your annual giving you just give it all at once and you do it right out of your IRA and it doesn't create a tax deduction but it also doesn't create taxable income. It's like it never happened.

So it's it's a pretty cool thing and what we want to talk about today. Some of the rules around this so we don't know. I want I want to caution folks. I don't want people to run out and start doing this all by yourself. Unless you know the rules in your real comfortable should know the rules and I'll state that anybody that wants help with this. If you given money to the church or some other charity that's important to you.

I'll be glad to help you with this or help your financial advisor anybody that is not as up on them as I am, be glad to give you some guidance.

Make sure you don't violate any of those rules or you could just call me up to do a financial plan or just specifically for that and you know what will. This is just part of what we do for every one of our clients. It's over 70 and the other thing you can always do is share that there's a podcast right now that I heard this great thing you know on qualified young charitable distributions you shared in your Sunday school class.

Most of the finishing well podcast please yeah so once you reach now age 72, used to be 70 1/2 government doesn't make things easy and they just don't get it almost looks like there intentionally making these art and that's not the fact they just they get past a different time so required minimum distributions now start at age 72 or immediately thereafter and so once you reach that age.

If you have money in a traditional IRA and you've never paid tax on the money yet your required to take distributions each year of the minimum amount required minimum distribution we could do several shows on the rules and regulations for those and we have and we will just understand that's at the foundation of the QCD rule is, is that because you are required to take money out of your IRA every year. Why not give some of it or all of that required minimum distribution directly to the church if it saves you some taxes and you truly don't need this to live in your planning on being charitable. Anyhow, this is a real tax efficient way to do.

My understanding is again get end of the rules later. But I fear the regular tax year. Not like this year might say next year that you normally give 10% of your income and say make $100,000 in income a year and you normally give 10% at church, which church which is $10,000 that you could at the beginning of the year. Take that whole distribution of $10,000 Autocare QCD and and go ahead and give the church right now and say here's Mike Tyson here. Now obviously they benefit in immediately probably need the money right. The way things really are.

But then, in your case, you know you've given your tied to the church and hopefully that would allow for to give more at whatever level you want to, but you you you been able to do that and then since essentially you are making that type out of money that you've never paid tax on and so you begin my rent will that piece right you get more bang for your buck, so to speak. In other words, rather than having to give the church $14,000 in order to cover the taxes and whatever I don't label and Matthew do much better with that it would require this much taxable income in order to give the net of $10,000 yourself essentially saving that right coming right out of the chute well and it meets your RMD so that's the other benefit from is that if you otherwise would've had to withdraw this money and then pay taxes on and you felt like you could give the whole amount of money you. You've just met your RMD for the year so you know it's a beautiful thing and you can give more than your RMD's is a say in this example you just gave a person's required minimum distribution or RMD was only 6000 they can still give 10,000 out of the IRA.

You can give more than the minimum distribution. It's just a stating that you've now met your minimum distribution for that year and not add up any tax and it's a beautiful thing. But before you run off like you said. And don't give 10,000 but this was all part of strategy will make sure you do it right yet when the second part of the show organist talk about the rules around this so that if you clearly understand these rules that that the layout for you, then you can go and do this and probably do a little homework online, but I would caution with you as you make a mistake. All this becomes taxable right so you can say that again this is today show two CDs of the joy of tax-free giving area can be found in Tom's book the complete card number guide to planning for living retirement which you can find a cardinal guide.com and when we come back, Sharon some more along these lines. Again, it may not apply directly to you to have some understanding of these things is is really helpful because you may have a friend that you write back. Hans and I would love to take our show on the road to your church, Sunday school, Christian or civic group.

Here's a chance for you to advance the kingdom through financial resources and leveraging Hahn's expertise and qualified charitable contributions veterans aid and attendance IRA so security care and long-term care.

Just go to cardinal guide.com and contact Tom to schedule a live recording of finishing well, your church, Sunday school, civic group, contact Tom to cardinal guide.that's cardinal guide.com the welcome back to finishing well certified financial planner, Hahn's child today show is QCD which means qualified charitable distribution. The joy of tax-free giving. Okay so just to cover what we went over in the first show qualified charitable distribution. You can make it make a contribution to your church or other qualified charity directly from your IRA and avoid a tax impact on you on money never pay taxes. Now it needs to be from an IRA, you can have several IRAs. Many people have two or three IRAs.

Money came from different places. They were for their own and so you can have multiple IRAs and you can take the qualified charitable distribution just one that's for starters you can do your RMD required minimum distribution just under one of you even though you go to the bank and you ask him all there to tell you about is your required minimum distribution out of this one account. But if you have three accounts, all of the same person or all traditional IRAs.

You can do what's called aggregating you can go through and you can decide which account you want to take your minimum distribution from and I could be the one that has the most cash in it as opposed to securities maybe don't want to sell securities in one to do and RMD could be the one with the most money. This makes things a little bit simpler so so that's the first point we want to get with required minimum distributions are RMD's and then when we do them with a QCD a qualified charitable distribution. We can again do that out of just one account and it can be for the required minimum distribution or more. You can call the way up to $100,000 per person per year so the people that have a large IRA or your very advanced age and you see the wisdom in this and you want to pretty much give away your IRA to the church and then perhaps give your children or your heirs money that's Artie had tax paid on it. Then you will be handed over a tax debt to your kids so somebody at the end of their life could could give a large amount every year can be $100,000 per person. So that's one of the rules was that you can't start this until your age 70 1/2-year-old and that's with the old rule was for required minimum distribution.

So having change that.

So if you're not yet 70 1/2, then that doesn't apply to you this year or maybe next year or for a few years you can still plan for a contribution is 77 were doing financial planning. If a person has a desire to give a significant amount to their charity.

We can plan to wait until 70 1/2 and then give a sizable amount and put that into the financial planning within every year after 70 1/2, then you're able to do this every year and you're able to meet your required minimum distribution for that year by from your IRA so you could never pay tax on that money. If you just give it away give away the required minimum distribution.

So as we talked earlier people have done this in exchange for their typing and knowing other words, if you give 10% to the church of whatever it is you do give to the church, we can calculate that on an annual basis and you can do that through your IRA and work out much better on the taxes now. What a lot of folks are not really aware of with her charitable giving is under the new tax law. The tax cut jobs act of two or three years ago you got such a high standard deduction. Now where they just said itemizing your deductions you just take the standard deduction. Many more people are doing that now it's like 25, $26,000 for a married couple of standard deductions that they're really not getting a tax benefit by their substantial giving so this is an opportunity to shift their giving from their regular money in their income money in their savings over there IRA and you know perhaps if if you feel so inclined, you could give more through this because you're getting up tax benefit from so there's lots of strategies with this but realize you don't normally write one of things I understand about your CD is it has to be your first essentially has to be your first distribution of the year. From an IRA so this is a place that people mess up as they've Artie taken a distribution out of there IRA sometime earlier in the year they hear about your CDs, like merely read about it. They sell that's nice and they go to their financial person or they just do it online themselves and they give the contribution directly to the charity and then it's disallowed to have to pay tax like it was distributed them because it wasn't their first distribution year which makes the interesting timing of today show as were parent December so obviously if you Artie took distribution this year and two 2020, you can begin to go okay in January. Be a good time right but because this year is different going on to some nice out so 2020 is different for a lot of reasons of the site and for tax purposes under the care Zach. They gave everybody a freebie on minimum distributions for this year.

So if you been taken. Minimum distributions are this was your first year. You don't have to anymore and my guess is you Artie know that if you didn't know that now you do that you don't have to worry about that during 2020. Regardless of how now if you taken no distributions during 2020 and you want to do one of these key CDs and you're not worried about the RMD limit you just want to give the money and you don't want to tax think you get that done between now and December 31 and the money will go to the charity of the taxable to you and it'll effectively count as your RMD even though you didn't have one required this year.

If you don't want to do that you want to get the RMD required minimum distribution credit will then you can just wait till January and in January you're gonna want to decide how much you want to give to the church or other charity on Jan in January and it needs to be your first distribution. You can do it all out of one IRA so if you have multiple IRAs we can do the TCD to the charity just out of the IRA out of one of the RX and we can get into why we pick one or that we have to spread this around and do several checks that would get even more complicated, but it's important that the money goes directly from the IRA to the charity done faster. Your aunt passes through your hands during the tax if it ends up with the charity and get taxed.

So that's needs to be the first distribution of the year is to go directly to the charity you need to be 70 1/2 or older did needs to be less than hundred thousand dollars a year and a year can be out of just one IRA. Another one was the whole idea that that actually I learned from watching your video, which by the way there on YouTube and the just and Facebook so apparently if you got a 401(k) not but you know that just seems interesting to me to hear you got somebody that is over age 70, but the only reason they would be able to qualify for QCD and their only way they'd have a 401(k) I would think it had already rolled it into an IRA is if they're still working for efficient working religiously with her that there are reasons to leave money in a 401(k) after you retire reversible. Some 401(k)s won't let you once you leave you a certain amount and get to my get the money on some will we could just go over the reasons for that, but you have to make it up RMD arrived yet to make a distribution every year out of 401(k)s Nokia side and I know you do. Okay so which candidate QCD so this would be a time to think about rolling at overture me if you wanted to do. If you CD and you your money was in a 401(k) than we would need to roll your 401(k) transfer it into an IRA, which is pretty easy to do and we don't wander itself or do at home. You'll try home work done professional Debbie pretty easy to do and then from the IRA, you can do your minimum distribution and you can do a QCD so this brings up another valid point from my perspective is like.

It seems that if you have a bunch of money at him, a 401(k) or an IRA or Roth IRA that all these things would be really good to have a financial planner to go out. I see why you got it in. This had you considered that because you obviously from what I missed. Many people have hundreds of thousands, even millions in these large 401(k)s are large directly.

Do they do a lot of them through the 60s and into the early 70s don't really have a plan for distribution for their IRA me when you're younger than 70. Your IRA is all about avoiding taxes or postponing taxes is a better way to put it because the IRS can get the money was given to the church if you CD they can get the money and so people's thinking is just not there. And when they go to an investment advisor, financial planner, typically those folks are interested in the investment of the money and earning you a return you're interested in growing at all. The focuses of round accumulation and growth. When you get to be 70 now the government's telling you that you now need to turn this growth. This fund into an income. In fact, if you haven't done it by now were to require you through this complicated system of RMD is a required minimum distributions belly buds that a little bit. They moved to 72 under the just the most recent things correct. That's what was so that's now 72 and then they gave you a freebie on this is your in that category where you don't have to take one for 2020. But it's can be back in 2021 and then the TCD is just something, back there in the background which is a way to satisfy the required minimum distribution or more and give it directly to the chair so this does this make sense right and so in this case.

In the year of 2020 right and somebody hasn't made. I distribution this year that there might be an advantage and actually doing the QCD in December, rather than wait until the January well, if they're good not to do another one in January.

Probably not mean but if they if they got the money there. They haven't taken any withdrawals from their IRA in 2020, have needed to and there over 70 1/2 11.

This is going get done now if you don't do it. If you wait till January the QCD needs to be your first distribution of the year. So if you might want to withdraw other money just to live off of her by something or whatever. At some point during the year, you need to make sure this QCD is done at the beginning of the year. You know I get these out order. You can get yourself intact, that's what January is a good time at Dover and as always, we seem to run out of time before we run out information so that's why there's a whole book the complete cargo guide to planning for living retirement as well as Hansson's website cargo guide.com and I can just assure you he would love love love to tip to begin that this process of putting all the stuff together in order Social Security and leisure income coming from all seems like all the stuff in order to finish well. So that's why it's going to cargo guide contact times he would love to help you along these lines. Specially you know this time of year when the joy giving competes in a really really fun for my perspective. And you know just amazing things of God to be glorified force. Thank you for another great, thank you. We hope you enjoyed finishing well with you by cargo guide.com visit Cardinal guide.com for free downloads of the show previous shows on topics such as Social Security, Medicare and IRAs long-term care life insurance and investments and taxes as well as cons best-selling book, the complete Cardinal guide to planning for and living in retirement and the workbook once again for dozens of free resources past shows get Hans book go to Cardinal guide.com if you have a question, comment or suggestion for future shows. Click on the finishing well radio show on the website and send us a word. Once again that's Cardinal guide.com Cardinal guide.com this is the Truth Network