IRA to Charitable Gift Annuity Rollover in 2023

Section 307 of the Secure 2.0 Act allows a one-time rollover of $50,000 from an IRA to a life income plan. This provision amends Internal Revenue Code Section 408(d)(8) and creates a limited one-time IRA rollover into certain qualified life income plans. The qualified charitable distribution (QCD) of up to $50,000 into a life income plan is permitted on or after January 1, 2023.

The $50,000 IRA distribution may be to a charitable remainder annuity trust (CRAT), a standard payout charitable remainder unitrust (CRUT) or an immediate charitable gift annuity (CGA). A net income plus makeup unitrust (NIMCRUT) or a deferred payment gift annuity are not qualified charitable life income plans.

The remainder trust with the remainder interest of the life income plan must be distributed to a qualified nonprofit. For a charitable gift annuity, it must have a 5% or higher payout rate and be qualified under Section 501(m)(5)(B).

The payments from the CRT or CGA must either benefit the IRA owner, or the IRA owner and spouse. All payments from a charitable remainder trust will be ordinary income. Because there is no investment in the contract under Section 72(c), all payouts from a gift annuity will also be ordinary income.

The bill permits an inflation adjustment starting in 2024. The $100,000 limit for current IRA rollover gifts and the $50,000 one-time limit for gifts to a life income plan will be adjusted for inflation. The new numbers will be rounded to the nearest thousand dollars.

Editor's Note: This new one-time QCD option will be used primarily for IRA-to-gift annuity rollovers. It is unlikely that donors or trustees will fund or accept a $50,000 charitable remainder unitrust or annuity trust. At a future date, there may be an expanded rollover limit that enables IRA rollovers to charitable remainder trusts