QCDs and IRA beneficiary gifts: Know the difference

By Diana Coyle, CICF Director of Nonprofit Services and Sustainability 

IRAs may not be the first thing you think of when planning fundraising strategy, but they probably rank in the top three. Donors who have spent decades in the workforce have watched their 401(k)s, IRAs, and other retirement accounts grow, so these accounts are a significant part of their wealth and their charitable plans. They also create plenty of confusion.

Here is the most important point. Retirement assets can play a role in giving in two very different ways. One happens during a donor’s lifetime. The other happens later, as part of a donor’s legacy plan. You don’t need to become a tax expert on either. Knowing the difference helps you recognize an opportunity and encourage a donor to talk with tax, financial, and estate planning advisors.

Opportunity #1: Giving from an IRA during life

A donor who has reached age 70½ may be eligible to make a Qualified Charitable Distribution (QCD) directly from an IRA to an eligible charitable organization. The opportunity begins at 70½ even though Required Minimum Distributions (RMDs) generally begin at age 73 or later, depending on birth year. For 2026, the QCD limit is $111,000 per taxpayer, and for donors already subject to RMDs, a qualifying QCD can count toward the RMD.

Why should donors care? A qualifying QCD generally is excluded from taxable income rather than claimed as a charitable deduction, which makes it an attractive way for eligible donors to use IRA assets to support your organization.

Your organization’s role is to recognize the opportunity, not to give tax advice. If a donor over 70½ mentions an IRA, an RMD, or a tax-efficient way to give, you might say:

“We’re working with other donors who are using their IRAs to make charitable gifts. It would be worthwhile to ask your tax advisor whether a Qualified Charitable Distribution from your IRA to support our organization could make sense for you. I’ll forward a link to information on our website that you can pass along to your attorney, CPA, or wealth advisor.”

Opportunity #2: Leaving retirement assets to charity at death

Legacy gifts of retirement accounts are sometimes confused with QCDs, but the mechanics and rules are quite different. In a legacy gift, a donor names your organization as beneficiary of all or a percentage of an IRA or other retirement account. This is not a QCD. There is no age-70½ requirement, and your organization receives the assets after the donor’s death. These gifts also aren’t limited to IRAs. 401(k)s, 403(b)s, and other retirement accounts can be left to charity through a beneficiary designation.

Retirement accounts are especially attractive for charitable estate planning. Traditional retirement assets left to individual beneficiaries may carry income tax consequences, while a tax-exempt charity generally does not pay federal income tax on retirement assets it receives for its charitable purposes.

The mechanics are relatively straightforward. A donor typically can name your organization by updating the account’s beneficiary designation rather than changing a will or revocable trust, though the designation should be coordinated with the donor’s overall estate plan and reviewed with legal, tax, and financial advisors. To open the conversation, you might say:

“If you’re thinking about including our organization in your estate plan, it would be a great idea to ask your advisors whether retirement assets are an appropriate way to accomplish that goal.”

Don’t mix the two

During life, an eligible donor age 70½ or older makes a QCD directly from an IRA to a charitable organization. At death, as part of a legacy plan, a donor names a charitable organization as beneficiary of an IRA or other retirement account.

A donor might use one strategy, both, or neither. A younger donor nowhere near “QCD age” could include your organization in a 401(k) beneficiary designation right now.

One more item to keep on your radar: Congress is considering bipartisan legislation that could expand QCD opportunities. The Charity Parity Act would allow eligible donors to make QCDs directly from certain employer-sponsored plans, such as 401(k)s and 403(b)s, rather than only from IRAs. Stay tuned.

Your fund comes with a sounding board. Whether it is an endowment, a board-designated endowment, or a non-permanent fund, we are glad to talk through a donor’s question or an idea you are still shaping. Use the form below to reach out.

About the author

Diana Coyle, director of nonprofit services and sustainability, is dedicated to helping Central Indiana nonprofits access the tools, knowledge, and relationships they need to thrive. In collaboration with her CICF colleagues, she supports CICF’s nonprofit partners by offering professional development, resources, and technical assistance that strengthen organizations and their leaders. With more than 15 years of experience in leadership and community engagement, she is committed to fostering connections that amplify the missions of nonprofits and create lasting impact across the region.