Charitable Gift Annuity_RMD

[EvelynTroy]

Thanks in advance for direction -
I hold a tIRA and have a total of $23,000 RMD for 2025.
I wish to roll-over the $23K RMD into a Charitable Gift Annuity - Age 78 and will earn 7.6% income until I pass away. You can fund the CGA cash or publicly traded securities. The CGA

My question - where to take the RMD amount from that is best for tax purposes.
In my tIRA Schwab account I hold very highly appreciated/large amounts in:
Dimensional U.S. Core Equity 2 (ETF) _DFAC (ER 0.17)
Dimensional U.S. Targeted Value (ETF)_DFAT (ER 0.28%)
Cash Account with $57,000 ( a Schwab brokered CD matured last week)

I also hold an IRA Multi-year Guaranteed Annuity (MYGA) that requires an RMD taken, but I am doing the total from Schwab tIRA.

If needed my portfolio is 60% fixed income and 40% equity and it is in balance using 0.05%.

Should I take the RMD amount by cashing in $23K from a DFA ETF or take it from the Cash Account.
Thanks again. If you need additional info as to how Charitable Gift Annuities work I can provide links.
Evelyn

[Harmanic]

You can't roll over an RMD to a Charitable Gift Annuity. You would need to take the RMD first and then roll over funds from the remaining balance. You can make a one time roll over of $54,000 in 2025 from your IRA after you take your RMD. It will reduce your RMD for future years though.

Keep in mind that this is a once in a lifetime rollover and must all be done in one year. If you only roll over $23,000, you can't contribute the remaining amount in future years.

[ee_guy]

You can't roll over an RMD to a Charitable Gift Annuity. You would need to take the RMD first and then roll over funds from the remaining balance. You can make a one time roll over of $54,000 in 2025 from your IRA after you take your RMD. It will reduce your RMD for future years though.

You may be confusing Charitable Gift Annuity (CGT) with Roth conversion. You need to meet your RMD before doing a Roth conversion.

Both Fidelity https://www.fidelitycharitable.org/arti ... sions.html and Schwab https://www.schwab.com/learn/story/how- ... retirement explain in simple terms using RMD for CRT. "The bill contains Secure Act 2.0 retirement provisions and an expansion of the rules for qualified charitable donations (QCDs). A QCD is a direct transfer of funds from an Individual Retirement Account (IRA) to a qualified charity. QCDs can be counted toward satisfying required minimum distributions (RMDs) for the year if certain rules are met."

The full Secure 2.0 act is here: https://www.finance.senate.gov/imo/medi ... 0FINAL.pdf

[Harmanic]

You can't roll over an RMD to a Charitable Gift Annuity. You would need to take the RMD first and then roll over funds from the remaining balance. You can make a one time roll over of $54,000 in 2025 from your IRA after you take your RMD. It will reduce your RMD for future years though.

You may be confusing Charitable Gift Annuity (CGT) with Roth conversion. You need to meet your RMD before doing a Roth conversion.

Both Fidelity https://www.fidelitycharitable.org/arti ... sions.html and Schwab https://www.schwab.com/learn/story/how- ... retirement explain in simple terms using RMD for CRT. "The bill contains Secure Act 2.0 retirement provisions and an expansion of the rules for qualified charitable donations (QCDs). A QCD is a direct transfer of funds from an Individual Retirement Account (IRA) to a qualified charity. QCDs can be counted toward satisfying required minimum distributions (RMDs) for the year if certain rules are met."

The full Secure 2.0 act is here: https://www.finance.senate.gov/imo/medi ... 0FINAL.pdf

You are right. I was confusing the two. However, the second part is correct about the one time limit. If she only contributes $23,000, she loses the remaining room of $31,000 forever.

[EvelynTroy]

You can't roll over an RMD to a Charitable Gift Annuity. You would need to take the RMD first and then roll over funds from the remaining balance. You can make a one time roll over of $54,000 in 2025 from your IRA after you take your RMD. It will reduce your RMD for future years though.

Keep in mind that this is a once in a lifetime rollover and must all be done in one year. If you only roll over $23,000, you can't contribute the remaining amount in future years.

Thanks for the reply - Yes, I understand the Charitable Gift Annuity under the Secure Act is a one time, once in a lifetime distribution of usually a minimum of $25,000 up to the maximum of $54,000 for 2025, and that I can't contribute more in future years by catching up. Part of my dilemma just take the $23,000 from the RMD or use the $23,000 plus add and make the entire $54,000? I also understand once I contribute and set up the CGA I have no further access to this money - the charity has the money and pays me an income amount until I die at which time they can use the rest of the money.

Perhaps "roll-over" wasn't the correct term - somehow I didn't think I took the RMD myself had it in my hand and then contributed that amount to the Charity to create the Charitable Gift Annuity. I have met with the organization that I will be using for the Charitable Gift Annuity and they didn't mention what you indicated. - I was just advised and also read I can fund it with Cash from my RMD, other cash, or publicly traded securities.

Somehow I think there is something I'm not understanding - any additional clarification would be appreciated.
Evelyn

[EvelynTroy]

You may be confusing Charitable Gift Annuity (CGT) with Roth conversion. You need to meet your RMD before doing a Roth conversion.

Both Fidelity https://www.fidelitycharitable.org/arti ... sions.html and Schwab https://www.schwab.com/learn/story/how- ... retirement explain in simple terms using RMD for CRT. "The bill contains Secure Act 2.0 retirement provisions and an expansion of the rules for qualified charitable donations (QCDs). A QCD is a direct transfer of funds from an Individual Retirement Account (IRA) to a qualified charity. QCDs can be counted toward satisfying required minimum distributions (RMDs) for the year if certain rules are met."

The full Secure 2.0 act is here: https://www.finance.senate.gov/imo/medi ... 0FINAL.pdf

You are right. I was confusing the two. However, the second part is correct about the one time limit. If she only contributes $23,000, she loses the remaining room of $31,000 forever.

Sorry I posted before I saw your reply Harmonic to ee_Guy. I noted the minimum of $25,000 - this is what the organization I plan to contribute the CGA to requires.
Also I'm 78 so won't be doing any Roth Conversions.

I believe the organization I'm going to be contributing to does the paper-work to make the proper transfers from Cash/RMD/ or securities from my IRA.
Anyway, any suggestions, thoughts on contributing the RMD amount of $23K from my tIRA account or appreciated securities - I don't understand the advantages or disadvantages of one over the other.
Thanks.
Evelyn

[Harmanic]

You are right. I was confusing the two. However, the second part is correct about the one time limit. If she only contributes $23,000, she loses the remaining room of $31,000 forever.

Sorry I posted before I saw your reply Harmonic to ee_Guy. I noted the minimum of $25,000 - this is what the organization I plan to contribute the CGA to requires.
Also I'm 78 so won't be doing any Roth Conversions.

I believe the organization I'm going to be contributing to does the paper-work to make the proper transfers from Cash/RMD/ or securities from my IRA.
Anyway, any suggestions, thoughts on contributing the RMD amount of $23K from my tIRA account or appreciated securities - I don't understand the advantages or disadvantages of one over the other.
Thanks.
Evelyn

You won't pay tax on the amount transferred to the charity, but you will pay tax on the annuity payments.
If you are planning on giving more to this charity in the future, you will be better off contributing the maximum of $54,000 due to the one time limit.
The IRA is a better option, since your heirs would get a step up in basis on appreciated shares in a taxable account. From a tax perspective, it makes no difference to the charity.
The ability to pay the annuity depends on the solvency of the charity.
The payments will be lower than a commercial annuity. So if you need the money, a CGA is not the best option. However, if you have more than enough, it is a good way to transfer tax deferred assets.
When you die, the charity is the beneficiary of any remaining balance in the annuity.

If you have heirs, the tIRA is a much better option because you are preserving the ability of your heirs to get a step up in basis on non-qualified assets.

[Harmanic]

I was just advised and also read I can fund it with Cash from my RMD, other cash, or publicly traded securities.

Somehow I think there is something I'm not understanding - any additional clarification would be appreciated.
Evelyn

Cash is the worst option (for most people) if you are trying to limit taxes. You would get a tax deduction, but most retirees are already in lower tax brackets. I would rank the options in this order.

1. IRA
2. Highly appreciated shares
3. Cash

The potential for a cash tax deduction is also hampered by the fact that most people do not itemize their tax returns, so there is no tax benefit at all if you use cash. You also get a deduction for the full value of appreciated shares, but the same limit applies if you don't itemize. At least you do not have to pay capital gains. However, you may already be paying $0 on capital gains or 15%. Finally, you need to consider if you are subject to state taxes.

In summary, in the vast majority of cases an IRA is by far the best asset for contributing to a CGA.

[EvelynTroy]

Thank you very much Harmanic. I have to get out the door this a.m. but will return to your replies this evening and post properly.
Evelyn