Most attorneys, accountants, and financial advisors are well-aware of donor advised funds and the reasons behind their popularity. Especially when a donor advised fund is established at the PACF, this vehicle is an excellent way for your clients to organize their charitable giving and get even more connected to the causes they care about.
Enter the Qualified Charitable Distribution
Your clients can give nearly any type of asset to a donor advised fund at the PACF. A notable exception, though, is the Qualified Charitable Distribution (QCD). A QCD allows a taxpayer 70 ½ or older to make a direct transfer of up to $100,000 annually from an IRA to a qualifying charity. A donor advised fund is not considered to be a qualifying charity.
Although donor advised funds cannot accept QCDs, the PACF offers other types of funds that can accept QCDs. For example, designated funds and field of interest funds are ideal recipients of QCD transfers. These fund types are often overlooked, despite the high value they can deliver to your client and to the community.
What is a field of interest fund?
A field of interest fund is a fund held by a community foundation that is used for a specific charitable purpose such as education or health research. Perhaps your client is passionate about health and wellness solutions, conservation, or preserving works of art, for example. Your client selects the name of the fund (family, cause-related or even nondescript) and then, the knowledgeable team at the PACF distributes grants from the field of interest fund in a way that is aligned with your client’s values and charitable wishes outlined in the fund documentation.
What is a designated fund?
Designated funds are a type of restricted fund in which the fund beneficiaries are specified by the grantors. These are a good choice for a client who knows they want to support a particular charity or charities for multiple years. The client names the fund and the PACF fulfills the distributions. Made over time, these funds can help the charity’s or charities’ cash flow planning. Distributions from a designated fund are aligned with your client’s wishes set forth in the original fund agreement.
For the client aged 70 ½ through 72, a QCD removes funds from an IRA before the client reaches the age-73 threshold for Required Minimum Distributions (RMDs). This can lessen the eventual income tax hit that accompanies RMDs. And for RMD-applicable clients, the QCD counts toward their RMD. In both cases, the QCD transfers do not fall into the client’s taxable income.
QCDs are even more popular now that the $100,000 cap will be indexed for inflation under the new laws. Also, under the new laws, a one-time, $50,000 distribution to a charitable remainder trust or charitable gift annuity is now permitted.
Ruth Hornbrook passed away in 1990, yet she still provides a safe haven for homeless animals in communities throughout West Virginia. During her lifetime, Hornbrook was a tireless humane society volunteer. To ensure continued support for humane societies throughout the state, Hornbrook established the Ruth Hornbrook Memorial Fund within the PACF through a bequest in her will. The purpose of the fund is to benefit humane societies in West Virginia, with preference given to the needs of new societies. Through this charitable fund, thousands of dollars worth of grants have been distributed to humane societies across the state. New animal shelters, humane educational programs, and new equipment are a few of the many programs the that Ms. Hornbrook has been able to support with her forward-thinking creation of a charitable fund with the PACF.