You may have given estate and legacy gift planning some attention but may still have some unfinished business. We are happy to be a resource as you continue your estate and legacy gift planning journey.
2024 UPDATE (SECURE ACT 2.0 PROVISIONS INDEXED FOR INFLATION STARTING 2024 PER JOINT COMMITTEE ON TAXATION (JCT) BLUE BOOK RELEASED 12/21/23)
A qualified charitable distribution (QCD) allows you to roll funds directly from your IRA to a qualified charity like United Way of Santa Barbara County. Those amounts can be used to satisfy your required minimum distributions (RMDs) for the year and the amount donated is excluded from your taxable income. You are not required to itemize to do this.
THE TESTAMENTARY CHARITIABLE REMAINDER UNITRUST MAY BE WORTH CONSIDERING
JULY 2023 UPDATE
If you long ago named your children as the beneficiaries of your IRA, you may want to revisit this decision with your financial advisor. Your heirs may end up paying higher taxes on the inheritance they receive because of the removal of the "Stretch Distribution".
The SECURE Act became effective on JANUARY 1, 2020. The "10-Year Distribution Rule" was created for most inherited IRAs where the owner passed January 1, 2020, or later. This resulted in requiring full distribution in 10 years for most beneficiaries who were adult children of the IRA owner, instead of over their entire lifetime. When the "10-Year-Distribution Rule" was created, it was not clear if the 10-year rule required any RMD for any of the calendar years except for the last year of the 10-year period.
Clarification was attempted by the IRS on OCTOBER 7, 2022 in Notice 2022-53. The IRS waived penalties for beneficiaries who "failed" to take 2021 and 2022 RMDs during the time of unclear guidance. Final regulations were to be forthcoming and would apply (at earliest) to the 2023 distribution year.
On JULY 14, 2023, an advanced version of IRS Notice 2023-54 was issued. It indicates that heirs subject to the 10-year rule are not required to take an RMD in 2023, 2022 or 2021. In the release, the IRS said they expect to release final guidance in 2024.
The Testamentary Charitable Remainder Unitrust - The Give It Twice Trust
Those who took unnecessary IRA RMDs in 2021, 2022 and 2023, cannot reverse those transactions. With the loss of the Stretch Distribution option for many IRA beneficiaries and the lack of clarity around future guidelines, if you are a charitably minded IRA owner, you may want to relook at how to distribute any remainder in your IRA.
When you revisit your estate plan, you may want to ask your advisor about funding a testamentary charitable remainder unitrust with your IRA balance. This plan can provide payments to your heirs, spread out the taxes on their inheritance and provide a future gift to United Way or other charity close to your heart. This is also called "give it twice trust".
Learn more about testamentary charitable remainder unitrusts here.
2023 UPDATE (SECURE ACT 2.0) - Starting in 2023, the age for required minimum distributions (RMDs) increased from 72 to 73. The RMD age will increase again in 2033 to age 75. Individuals who are currently taking RMDs will continue to take a distribution each year based on their age.
You may be looking for a way to make a significant gift to help further our mission. A bequest is a gift made through your will or trust. It is one of the most popular and flexible ways that you can support United Way of Santa Barbara County while not impacting your available cash today.
If you have a Donor Advised Fund (DAF) and wish to help United Way this year, you can make a gift from your DAF to support our work without affecting your personal financial security.
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If you are interested in learning more about any of these ideas, please contact us. Please also let us know how we can help you during this time.