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Question

Can I send my qualified charitable distribution (QCD) to a donor-advised fund (DAF)?

Answer

Simply put, no, says Allison L. Lee, attorney-at-law and director of trusts & estate content for FreeWill. “It does seem odd that not all charities qualify to receive QCD gifts but it's true,” she says. “The QCD allows a donor to pass along their RMD - or any part thereof - to an operating charity. Donor-advised funds do not meet this definition under the tax code so, therefore, like supporting organizations and private foundations, they're simply not eligible to receive QCD gifts.”

Lee adds, “It's worth pointing out that donor-advised funds can be named as the beneficiary of your traditional IRA as part of your estate planning. While this is different from making a QCD, it can offer important tax benefits as well that maximize your impact.” Specifically, donor-advised funds – a type of public charity – don't pay income tax on income from an IRA. That means 100% can be used to make a difference.

She notes, “At the end of the day unfortunately there's no single repository of eligible charities broken down by available tax benefits.” The IRS "Search for Tax Exempt Organizations" can help you access a wealth of information about any charity you may want to support (Charity Navigator and Guidestar are also reliable). “Best bet,” Lee says, “is to work with a tax or legal professional before engaging in any transaction.”

“Finally, if you're looking at a December 31, 2022, RMD deadline, you'll want to get the QCD paperwork done and submitted sooner than later,” advises Lee. During the busy end-of-year season, financial advisors and IRA custodians get incredibly busy and your best bet is to allow extra time for completion and processing if you want a transaction to qualify for the current tax year.

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Email Robert.Powell@thearenagroup.net


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Question

Can I send my qualified charitable distribution (QCD) to a donor-advised fund (DAF)?

Answer

Simply put, no, says Allison L. Lee, attorney-at-law and director of trusts & estate content for FreeWill. “It does seem odd that not all charities qualify to receive QCD gifts but it's true,” she says. “The QCD allows a donor to pass along their RMD - or any part thereof - to an operating charity. Donor-advised funds do not meet this definition under the tax code so, therefore, like supporting organizations and private foundations, they're simply not eligible to receive QCD gifts.”

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