SECURE Act Charitable Giving: A 4-Step Framework for Advisors

SECURE Act Charitable Giving: A 4-Step Framework for Advisors

Helping clients navigate the SECURE Act's impact on charitable giving starts with one core insight: the law bifurcated the Qualified Charitable Distribution (QCD) age from the Required Minimum Distribution (RMD) age, creating a new planning window and new opportunities. As an advisor, you can guide clients through this complexity with a simple, repeatable framework that assesses their age, tax situation, charitable goals, and legacy intentions. This article presents a practical 4-step framework you can use today.

Why This Framework Works

The SECURE Act and its sequel, SECURE 2.0, have made charitable giving from retirement accounts more powerful—and more confusing. The QCD, originally introduced by the Pension Protection Act of 2006, now has an inflation-indexed annual limit of $100,000, and a new one-time election allows up to $50,000 to fund a charitable gift annuity or charitable remainder trust. Yet the QCD age remains 70½, while the RMD age has risen to 73. This disconnect means clients who are 70½ but not yet required to take distributions can still make QCDs, but they need proactive guidance to do so. Our framework simplifies this by focusing on four key client attributes, ensuring no opportunity is missed.

The Framework Steps

Step 1: Assess Client Age and Eligibility

The first step is to determine if your client is eligible for a QCD. Eligibility begins at age 70½, regardless of whether they are subject to RMDs. Because the SECURE 2.0 Act raised the RMD age to 73, there is now a gap where clients are QCD-eligible but not yet required to take distributions. This creates a valuable planning window. For example, a 71-year-old client who doesn't need their RMD can still direct up to $100,000 (indexed for inflation) from their IRA directly to a qualified charity, bypassing income tax entirely. Document your client's age and confirm they meet this threshold before proceeding.

Step 2: Evaluate Tax & Income Impact

The second step is to analyze how a QCD affects your client's overall tax picture. Unlike a regular charitable deduction, a QCD excludes the distributed amount from gross income altogether, which can lower adjusted gross income (AGI). This may have cascading benefits: it can reduce Medicare premium surcharges, minimize the taxation of Social Security benefits, and lower exposure to the net investment income tax. For clients near income thresholds, a QCD can be a powerful tool to keep them below these limits. Use tax software or a manual calculation to model the impact of a QCD on AGI and related thresholds.

Step 3: Align with Charitable Goals & Vehicles

The third step is to match your client's charitable intentions with the appropriate giving vehicle. Not all charities qualify for QCDs. Donor-advised funds (DAFs), supporting organizations, and private foundations are excluded from QCD eligibility. However, public charities are eligible, and SECURE 2.0 added a new option: a one-time QCD of up to $50,000 can fund a Charitable Remainder Unitrust (CRUT), Charitable Remainder Annuity Trust (CRAT), or Charitable Gift Annuity (CGA). This is particularly attractive for clients who want to support charity but also need a stream of income. For example, a client could use a QCD to fund a CGA that pays them a fixed income for life, with the remainder going to charity. The initial transfer is excluded from gross income, though annuity payments are taxable as ordinary income and no charitable deduction is available. Ensure your client understands these trade-offs based on their priorities.

Step 4: Integrate with Legacy Planning

The final step is to consider how charitable giving fits into your client's broader estate plan. Retirement assets are among the most tax-burdensome assets to leave to heirs because of the SECURE Act's 10-year withdrawal rule, which can force beneficiaries into higher tax brackets. Leaving IRA assets to charity can be more tax-efficient, since charities don't pay income tax on them. For clients who want to benefit both heirs and charity, a combination strategy may work: leave taxable assets to heirs and tax-exempt charitable bequests from retirement accounts. Assess whether a retirement account charitable bequest aligns with your client's long-term legacy intentions and coordinate with their will or trust. This multi-faceted approach maximizes both tax efficiency and charitable impact.

How to Apply It

To apply this framework, start with a client meeting and use the following checklist as a guide. First, confirm the client's age—if they are under 70½, they are not eligible for a QCD yet, but you can plan for the future. Second, review their most recent tax return to identify AGI and any applicable thresholds. Third, clarify their charitable goals: do they want to support a specific charity, generate income, or leave a legacy? Fourth, discuss their overall estate plan and how charitable gifts fit in. Work through each step with your client, using real numbers where possible, and document the decisions made.

Here's a practical checklist you can use with clients:

• ☐ Client's age is at least 70½?
• ☐ Client's IRA custodian allows QCDs (most do)?
• ☐ Beneficiary charity is qualified (not a DAF, supporting org, or private foundation)?
• ☐ QCD amount is within the annual limit ($100,000 indexed for inflation in 2026)
• ☐ Client has considered a one-time QCD to fund a CGA, CRUT, or CRAT (up to $50,000)?
• ☐ Client's AGI near Medicare premium or Social Security taxation thresholds?
• ☐ Client has reviewed their estate plan to align charitable bequests with tax-efficient asset distribution?

Examples & Case Studies

Let's walk through two hypothetical scenarios to illustrate the framework in action.

Scenario 1: The Pre-RMD Client

Alice is 71 years old, still working, and has not yet started taking RMDs because the SECURE 2.0 Act raised the age to 73. She has a large IRA and itemizes deductions, but she's concerned about future RMDs pushing up her taxable income. Using our framework, you assess that Alice is QCD-eligible. You evaluate her tax situation and note that a $20,000 QCD would reduce her AGI, potentially lowering her future Medicare premiums. Alice wants to support her local food bank, which is a qualified public charity. She decides to make a direct QCD of $20,000 this year. Because she doesn't need the RMD income, she effectively reduces her taxable IRA balance while fulfilling her charitable intent. This strategy works beautifully because Alice is in the gap between QCD eligibility and RMD age.

Scenario 2: The Income-Seeking Client

Bob, age 75, is charitably inclined but relies on his IRA for retirement income. He has a $500,000 IRA and wants to support his alma mater, a qualified public charity. He also wants a steady income stream. Using step three, you explore the SECURE 2.0 option to make a one-time QCD of up to $50,000 to fund a Charitable Gift Annuity (CGA). Bob transfers $50,000 to a CGA, which will pay him a fixed annual income for life. The transfer is excluded from his gross income, providing immediate tax savings, and the annuity payments are partially tax-free. Bob gets the satisfaction of supporting his university while maintaining his lifestyle. This case highlights the value of knowing the new SECURE 2.0 tools.

Common Mistakes to Avoid

• Assuming QCD age equals RMD age: Because the RMD age is now 73, many advisors mistakenly tell clients they must wait until 73 to make QCDs. In fact, QCD eligibility remains at 70½. Missing this distinction can cost clients years of tax-free giving opportunities.
• Ignoring the impact on AGI: Some clients focus only on the direct tax deduction and overlook the broader benefits of lowering AGI, such as reduced Medicare surcharges and Social Security taxation. A QCD can be more valuable than a traditional charitable deduction because it reduces AGI directly.
• Recommending QCDs to ineligible charities: Donor-advised funds, supporting organizations, and private foundations do not qualify for QCDs. Double-check the charity's status before making a recommendation.
• Overlooking the new one-time CGA/CRT option: SECURE 2.0's allowance for QCDs to fund charitable gift annuities and remainder trusts is still underutilized. If a client wants income and charitable impact, this new tool deserves serious consideration.
• Failing to coordinate with estate plan: A QCD is only one piece of the puzzle. Without aligning with the client's will or trust, they may miss opportunities to use retirement assets for charitable bequests, which are more tax-efficient for heirs.

Tools & Templates

To streamline your practice, consider using a simple comparison chart that outlines the features of each charitable giving vehicle. Below is a sample table you can adapt for clients:

Additionally, you might use the flow chart approach suggested by the NAEPC Journal to walk clients through their options step by step. Feel free to customize it with your own branding.

Conclusion

The SECURE Act and SECURE 2.0 have fundamentally changed the landscape of retirement account charitable giving. The key takeaway is to understand that QCD eligibility is now separate from RMD age, opening a planning window for clients aged 70½ to 73. By using a systematic framework that assesses age, tax impact, charitable goals, and legacy intentions, you can guide clients to make tax-smart gifts that maximize both their financial well-being and their philanthropic impact. This is particularly valuable as you support your clients with retirement account charitable bequests and integrate these strategies into their overall estate plan. For more on how to help clients with charitable giving, check out How Financial Advisors Can Help Clients with Charitable Giving and Estate Planning Attorney's Guide to Charitable Bequests. For advisors seeking practical tools, see Free Estate Planning Tools for Professional Advisors. For a deeper dive into tax implications, refer to our Tax Planning Strategies for Charitable Estate Gifts. The SECURE Act's changes are complex, but with this framework, you can confidently help your clients navigate them and turn their retirement assets into a powerful force for good.