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Use your RMD to start a charitable fund

To alleviate the tax burden of required minimum distributions from IRAs, many people are using their RMDs to make qualified charitable distributions (QCDs) to their favorite charities. These tax-free distributions are a financially advantageous way for clients age 70 ½ or older to turn their retirement savings into a meaningful gift.

Normally, distributions from a traditional IRA are taxable when received. With a QCD however, these distributions become tax free as long as they are paid directly from the IRA to an eligible charitable organization.

Each year, an IRA owner age 70 ½ or over when the distribution is made can exclude from gross income up to $100,000 of these QCDs. For a married couple, if both spouses are eligible, they can exclude up to $200,000 per year.

Unfortunately, QCDs often create headaches for donors who must process their distributions to charities individually – sometimes issuing several checks per year. One solution is to establish a charitable fund at a qualified community foundation. The Fort Dodge Community Foundation is a qualified community foundation.

Designated Funds: Designated funds can be a good choice for clients who prefer to support the same charities every year. These funds streamline the giving process by automatically awarding annual grants to one or more charities selected by you. You simply choose the charities you would like to support and make a tax free transfer directly from your IRA to establish the fund.The Fort Dodge Community Foundation then handles all administration and check writing, simplifying the paperwork and automating the distribution process for you.

Field of interest funds: Another attractive charitable giving option the Fort Dodge Community Foundation can offer is a field of interest fund which can be created with a QCD from your RMD. Field of interest funds allow your gift to make a real impact in the charitable organizations and causes you are most passionate about.

By establishing a field of interest fund, you can target your gift to address needs in an important area of community life. You simply have to identify your personal interest or cause, and the Community Foundation will award grants to community organizations and programs that are making a difference in that area.Your gift will stay flexible over time to continually meet the community needs in your defined field of interest.

Funds can be named in your name or your family’s name or anonymously. A field of interest fund can be as broad or as narrow as you desire. Field of interest funds are popular because of the flexibility they offer donors. Examples of field of interest funds include support of education, health care, the arts, environment, public safety, at-risk youth, animal rescues, community betterment, helping the underprivileged, etc.

In future years, you can direct your annual RMD to your designated or field of interest fund, allowing you to support multiple charities with just one QCD. Charitable dollars in your fund can be invested to grow tax free, or they can be placed in a money market account so they are readily available for grant-making. Many funds are invested and permanently endowed to ensure your legacy lives on long after you are gone. Others are non-endowed and short-term for more immediate grant-making.

To learn more about how you can maximize the impact of your retirement assets through charitable giving, cal;l (515) 573-3171 or email rk@fd-foundation.org.

Randy Kuhlman is the chief executive officer of the Fort Community Foundation and United Way.

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