NEW LEGISLATION ALLOWS Funding an Annuity with Your IRA

By Alvin Blitz, Esq., Chief Mission Advancement and Development Officer

Gift planners like me were caught off guard in December by a provision for IRA owners left in the 2022 Omnibus Bill. Effective Jan. 1, 2023, if you own a traditional IRA and are 70 ½ or older, you can take a one-time withdrawal of up to $50,000 to fund a charitable gift annuity (CGA) with your favorite charity (this is also available for funding a charitable remainder trust, but the amount is so small, I doubt you will see these types of transactions) for you or you and your spouse. WOW! That’s a generous gift for IRA owners AND your favorite charity (which I hope is the Masonic Charities). Let’s see how it works.

John is age 78, and his wife, Jill, is age 77. John has an IRA worth $500,000 and has a required minimum distribution (RMD) for 2023 of $10,000. In the past, John could direct that $10,000 to Masonic Charities as a qualified charitable distribution (QCD) and not pay taxes on the distribution. John can still do that in 2023, but now, he has another choice with his IRA. He can now give that $10,000 RMD and up to $40,000 more from his IRA TAX-FREE to fund a CGA.

The annuity rate is 6.1% based on his and Jill’s ages (it would be 7.2% if he just did the annuity for himself). That means they would get $3,050 per year for a $50,000 annuity until the death of the surviving spouse, at which time the remaining funds in the annuity would go to the Masonic Charities. The annuity distributions would be fully taxable when received each year, since John never paid taxes on the money used to fund the annuity. Still, this is a sweet deal for John and Jill and the Masonic Charities.

If you are interested in finding out what your personal rate is to fund such an annuity from your IRA, please fill out the enclosed business reply envelope, email giving@masonicvillages.org or call my office at 1-800-599-6454 and say, “I want a personal illustration for an annuity funded with my IRA.” We will get back to you and go over the particulars for setting up the annuity.

Learn more advice for estate planning by visiting masoniccharitieslegacy.org.