Give from Your IRA and Receive a Lifetime of Payments

Donors over 70½ can receive a lifetime of payments in return for a contribution to Caltech from their IRA account. This gift plan combines a charitable gift annuity and a Qualified Charitable Distribution (QCD) from an IRA. Let’s see how it works.

Charitable Gift Annuity — A charitable gift annuity is a simple contract between you and Caltech promising to pay you a fixed amount of money each year for life. The gift annuity contract is issued to you in exchange for your charitable contribution. The amount Caltech will agree to pay you depends upon your age at the time of your gift and does not change for the rest of your lifetime. Caltech invests and manages your contribution and your payments are backed by the financial resources of Caltech. Some or all of the payment you receive each year is taxed as ordinary income.

Qualified Charitable Distribution — A QCD — sometimes called a “charitable rollover” — is a contribution from your IRA directly to Caltech. You can make a QCD if you are at least age 70½ at the time of your gift. Unlike other distributions from your retirement accounts, you pay no income tax on a Qualified Charitable Distribution, although there is no charitable deduction for your contribution. However, your QCD contribution counts toward your Required Minimum Distributions (RMD) from your IRA without creating taxable income for you.

Charitable Rollover Gift Annuity — Under a new law effective in 2023, some donors can make a QCD in exchange for a charitable gift annuity. There are some rules and limitations:

  • You can exercise this option only once during your lifetime.
  • There is an aggregate limit of $53,000 for 2024.
  • The entire payment you receive from your charitable gift annuity will be subject to income tax.
  • You can include your spouse as a recipient of the annuity payment.
  • There is no income tax deduction for this contribution, although there is no tax on the QCD either.

Example

Consider Alan, a 75 year old who would like to make a special contribution to support Caltech. Alan has substantial assets in his IRA, and he knows that he is facing a RMD this year. Even though he doesn’t really need the income, Alan knows that his RMD is going to increase his income tax. Instead, Alan chooses to make a $53,000 QCD to Caltech in exchange for a charitable gift annuity which will pay him $3,710 (7%) per year for the rest of his lifetime. Alan understands that he is allowed to make this election only one time, but he is looking forward to securing a stream of payments for his lifetime while reducing his RMD and making a generous contribution to Caltech.

Please contact the Office of Gift Planning at giftplanning@caltech.edu or call (626) 395-2927 for more information. We would be happy to work with you and your advisors to help determine whether this new option is right for you.