Your Donors, the SECURE Act, and You

David Kulivan Senior Consultant AC Fitzgerald Author

David Kulivan, Senior Consultant

Toward the end of 2019, we saw the enactment of the Setting Every Community Up for Retirement Enhancement (SECURE) Act, which significantly overhauls the retirement system.

Let’s take a look at a few of the key changes:

  • Previously, individuals with traditional IRAs were required to take minimum distributions by April 1 following the year they turned 70.5. The SECURE Act pushed this age to 72.
  • Recognizing that people increasingly work past the “traditional” retirement age, the SECURE Act repealed the age limitation on contributing to an IRA.
  • Non-spouse individuals who received a deceased owner’s IRA could previously stretch out the distributions over their lifetimes. Now, they must take all distributions within 10 years (with a few exceptions).

What, if any, impact will this have on individual giving?

The extended period to contribute to IRAs will create greater IRA balances and could result in larger qualified charitable contributions. However, the elimination of the age limit on contributions may offset this, as deductible amounts contributed by an individual older than 70.5 to an IRA will offset the amount of qualified charitable deductions one can exclude from one’s income.

Due to changes to the “stretch IRA” for beneficiaries, donors may view the IRA as a less desirable vehicle for preserving wealth and providing for their heirs. Instead, they may see designating IRA assets to charitable entities as a more prudent step, while setting up other vehicles, like life insurance, to support their heirs.

So what should you do? Encourage your donors to discuss the impact of the SECURE Act on their estate planning with their financial advisors. Update your giving materials to incorporate new information on the SECURE Act. Strategically speaking, these new changes also give you a great reason to reach out to your donors to update them on the changes and convey how much you value their support. Finally, remember that giving is more than a discussion about contributions, distributions, and stretch IRAs; it is an opportunity for a donor to pass on his or her vision and values for a grand, noble purpose that you are privileged to help make possible.

David Kulivan serves as Senior Consultant at AC Fitzgerald. He uses his expertise in development strategy, relationship management, and corporate partnerships to fast-track his clients toward success.

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