Charitable gift annuities with IRA funds

[Good Listener]

I would like to seek some advice on this. I have now passed 70 and a half and thought I would be using my IRA to do a qualified charitable deduction AKA QCD. I didn't read the 2022 tax law that involved IRAs at all because apparently it authorizes somebody to take up to $50,000 from an IRA as a one-time shot and give it to a charity and collect interest for a qualified gift annuity. Then of course when you die all of the funds go to the charity. Can anybody think of any reason why you would not do the latter option of a qualified gift annuity as opposed to just a straight qcd? With the qualified gift annuity, you get annual or quarterly payments that are taxable of course. From the qcd you get nothing. Now of course there's the altruistic reason that I can think of which is that the charity gets all your money immediately with the qcd. And then they don't have to pay anything out. But my understanding is they use some money from the charitable gift annuities anyway and just reserve a little bit for the interest payments. My instinct is that for no good reason I should just do a straight qcd and not get any return. Any help here would be appreciated.

[fabdog]

It's certainly a nice feature they added. As you note, $50K goes from your IRA either way, and then you get lifetime payments (which, as you note, are taxable) Many folks using QCD's are looking to reduce income, and in this case depending on age you'll get ~$3K/year as taxable income for life.

But if you have a charity you want to give money to that supports the gift annuities, go for it.

Mike

[ReadyOrNot]

Some people may not need or want any more income and tax (and IRMAA or other high income charges). So they may not want the annuity. Also, if they want to give a bigger QCD, they may give away up to $100k, reducing what's in the IRA which may reduce the RMD for this year or the future.

[prd1982]

My assumption is if you get income from the $50k gift, then the charity is really getting less than 50k. Some of the money is returned to you, and the insurance company also makes a profit. I would vote to continue with your QCD plan. That is what we plan to do.

[petulant]

Better to just put $30,000 in a SPIA in the IRA and make a QCD of $20,000.

[Good Listener]

Better to just put $30,000 in a SPIA in the IRA and make a QCD of $20,000.

I think that would be a good idea, except I planned by next year to end my 6 year Roth conversion program and have no remaining IRA as I'd rather get the IRA into a roth. After all your comments folks I do realize that there is no free lunch and the charity would end up getting a little less so I'm going to do just a regular qcd if I do the qcd, otherwise just convert it to a Roth. Thank you for your help