The Alphabet Soup of IRAs

This month, we're diving deep to learn all about Qualified Charitable Distributions (QCDs) and how they can help donors to impact their community while also saving taxes on their IRA distributions. OCCF's Julie Dais and Laura Moon walk Dan through this tricky topic, and OCCF donor Richard Opdyke explains how he is helping students accomplish their goals through QCDs from his IRA. 

Visit occf.org to learn more!

Chapters

• 0:28 Intro
• 1:08 Interview with Julie Dais and Laura Moon
• 14:00 Interview with Richard Opdyke
• 19:42 Outro

Transcript

Dan Martel 00:28

Many donors today who wish to contribute to their favorite charities can do so by withdrawing money from their IRAs. A lot of people didn't know that could happen. This is known through something called a QCD or a Qualified Charitable Distribution. Hello there, I'm Dan Martel, and welcome back to our monthly podcast, Creating Impact Through Giving, which is brought to you by the Oklahoma City Community Foundation. Today, we'll be speaking with Julie Dais, the director of advisor partnerships and planned giving here at the Foundation, Laura Moon, who works in donor services and development, and Richard Opdyke, a longtime donor with the Foundation who has contributed to his favorite charities using a QCD. Our first guests today are Julie Dais and Laura Moon of the Oklahoma City Community Foundation. Welcome to the podcast.  

Julie Dais 01:16

Hi, Dan. We're glad to be here.  

Dan Martel 01:18

Well, I'm glad you guys are here. Thank you for being here. So, I want to get into this whole discussion about, qualified charitable distributions, kind of what is, what a QCD is.  

Julie Dais 01:28

A lot of people know it as an IRA rollover. 

Dan Martel 01:30

Okay. 

Julie Dais 01:30

So, like you hear that terminology, but a qualified charitable distribution is a distribution out of your IRA that goes directly to a charity. So, that's exactly what it is.  

Dan Martel 01:41

Excellent. Well, I'm glad to know, and I know there's a lot of people out there that had no idea that could be done. So, let's talk a little bit about that. So, Julie, since I'm on with you right now, what are some of the advantages a donor can receive by making contributions through a QCD?  

Julie Dais 01:54    

So, when a donor or an individual gets to 70 ½, they can look at their IRA and go, you know, I may have some either a, an eventual taxable estate, or I might want to assist charity. So, one thing that they can do, they can take money, a distribution from their IRA, a qualified IRA, and they can distribute it to a charity. One benefit of that is it will reduce the size of that IRA, which would reduce the size of a taxable estate. Maybe not so much, but it might help. But once you get to be 73, which is this year that the new law is 73, when you are required to do a required minimum distribution, when you pull that money out of the IRA, that is part of your income and that is reported on taxes. Let's say you have other income that's coming in and you go, oh my goodness, I've got to take that $10,000 IRA, that's really going to possibly pop me up into another tax bracket. 

Dan Martel 02:53

That's right. 

Julie Dais 02:54

So, they take the money, and they give it to a charity. It is not a deduction, but it allows that charity to use the full value of that. The individual does not get a tax deduction, but it does not go on their taxes. And that to me, you know, it's a way that you can be charitable but then also have some benefit tax-wise.  

Dan Martel 03:15

Julie, I want to stay a little bit on that, that same topic. So, you're saying that there is a minimum at the age of 73, the person that holds the IRA is forced to have to make some kind of a distribution?

Julie Dais 03:29

That is, that is correct. Because for all, you know, their working life, they've put funds in this for this very reason – when they've retired and they need that extra income to, you know, maybe fill out so, you know, social security or whatever. But sometimes they have additional income streams that they didn't think about when they were younger. And so, they start looking at this required minimum distribution almost with a little bit of dread. They think, oh my goodness, what am I going to do with that? That's going to put me in another tax bracket. Or I, you know, I really don't want to use that money right now. I don't need that money right now. This is a great way they can use the money and they can benefit the charities they love.  

Dan Martel 04:07 Laura, are you finding more and more donors looking at, at this type of situation to make some kind of a charitable distribution?  

Laura Moon 04:16

Yeah, most definitely. As was being said earlier, most people don't even realize maybe that you have to take a required minimum distribution or that there's even a qualified charity distribution option to kind of replace that income that you're required to take. But once, once a donor figures out about it, you find that year over year, they come to rely on that qualified charity distribution to kind of bypass that income and support a charity that they really care about. 

Dan Martel 04:45

Excellent. Well, how does a QCD differ from a typical IRA withdrawal?  

Julie Dais 04:50

So, you have to be careful. So, let's say you go, oh, I have to take my RMD is $10,000 this year, I'm going to take it as a distribution and I'm going to give it to the charity. DO NOT DO THAT! Do not do that because, because you've withdrawn it, now that's taxable income, even though you gave it to the charity, you know, after the fact. So, the qualified charitable distribution is, may not be all of your RMD. You have to work with your IRA holder, your financial advisor. You know, there's a lot out there. They understand this process and they can answer a lot of those questions like, when do I do that? And that is, timing is crucial. You need to be able to do it by the end of the year.  

Dan Martel 05:33

So, you have to itemize it when you use a QCD.

Julie Dais 05:35

No, you do not. You do not itemize.

Dan Martel 05:36

You do not. Oh, okay.  

Julie Dais 05:36

So, remember, remember this is the money that is the RMD is coming in as income. So, when it goes straight to the charity, you can't touch it. When it goes straight to the charity, it doesn't even show up on your taxes at all. 

Dan Martel 05:51

Got it. Got it. 

Julie Dais 05:51

So, you don't even have to itemize to benefit from this particular strategy.  

Dan Martel 05:54

You know, I know that people start IRAs at various times throughout their lives and in various phases of their careers, but my understanding is that you have to be a certain age before you can, can become eligible for a QCD. And you had mentioned that 70 ½, is that…

Julie Dais 06:10

70 ½. 

Dan Martel 06:10

Is that a recent deal, or is that been around for a while?  

Julie Dais 06:13

That has been around for a while. What has changed with the new law that was signed by Biden, that increased the required minimum distribution to be taken from 72 to 73. So that is the one big change. There are other changes, like they've shortened the window if you have an inherited IRA, and there's conversations about split interest gifts, which probably is another podcast.  

Dan Martel 06:36

So why is that, why is there an age restriction on this if somebody's 69 couldn't do something like this? Why is that?  

Julie Dias 06:42

Laura and I will be glad to discuss with you the wisdom of the US government and the IRS services. 

Dan Martel 06:49

<laugh> okay. 

Julie Dias 06:50

What do you think Laura?  

Laura Moon 06:51

<laugh> I think that's an excellent point. I think that's a great, maybe that's another whole podcast episode we've got relying. 

Dan Martel 06:56

So, there really isn't any set rule then, it's just, that's just the way that the, the Feds decided to, to make it correct. 

Julie Dais 07:00

Yeah. 

Dan Martel 07:00

Interesting. And is there a maximum annual amount that you can qualify for a QCD?  

Julie Dais 07:06

Yes. 

Dan Martel 07:06

What is that? 

Julie Dais 07:07

So, the maximum that you can utilize for a QCD is $100,000. I don't think there's a minimum. Is there, Laura? 

Laura Moon 07:13

Huh-hmm.  No.

Julie Dais 07:13

No.

Dan Martel 07:13

So, let me ask you this. Let's say when it comes to tax reporting, how, how does this work with a QCD? Would it be just a normal distribution on an IRS form? How does that work?  

Laura Moon 07:25

So, the QCD, whenever you take a QCD, it's reported by your IRA custodian as a normal distribution on your IRS form 1099-R. So, it's going to look normal. But again, you're getting to bypass that income that you would have to take with your required minimum distribution from your IRA. So your IRA custodian will take care of it on your, for the IRS form. And it just looks kind of like a normal distribution, but it's a qualified charitable distribution. 

Dan Martel 07:52

You know, so, you know, it's interesting. I hear things that, you know, this is something that could be a, a great tax benefit. Is that true?  

Julie Dais 07:58

Well, it is. If you're reducing your taxable income by that fund bypassing your, your income stream. You know, so in that essence it is. And your, to me, the biggest benefit is helping a charity that you love.

Dan Martel 08:10

Absolutely.  

Julie Dais 08:11

That true. That, that's what makes me happy. 

Dan Martel 08:13

And is that is that the reason that people come to the Oklahoma City Community Foundation to speak with you and your team about things like that?  

Julie Dais 08:20

How they can make a difference. That's what it's all about, and it's what they want to do. I know Laura has lots of stories about those donors that have come to her and said, “Hey, I would like to do this.” I know that there are, so be careful when you start talking about a qualified charitable distribution because there are requirements. 

Laura Moon 08:37

Yeah. 

Julie Dais 08:37

And that's why you really need to talk to your financial advisor, your accountant, and then talk to one of us at OCCF.  

Laura Moon 08:43

As Julie said, it's… 

Julie Dais 08:44

Yeah.

Laura Moon 08:44

There are, I mean, you, we have to meet whatever requirements the IRS puts on, you know, distributing to charities. So, it has to go to a 501(c)(3).  

Dan Martel 08:55

Ah, good. Okay. 

Laura Moon 08:56

Public charity. 

Dan Martel 08:56

That's good to know. All right.

Julie Dais 08:57

Yes.

Laura Moon 08:57

So, it can't go to a private foundation. 

Dan Martel 08:59

Okay. 

Laura Moon 08:59

You've got your family foundation. That wouldn't qualify because that's not a public charity.  

Dan Martel 09:05

Churches or anything like that.  

Laura Moon 09:06

Yep. Those,  

Dan Martel 09:07

Those don't count

Laura Moon 09:07

Churches do count. 

Dan Martel 09:09

They do count, okay. 

Laura Moon 09:09

Because in the, in the IRS's eyes, those are 501(c)(3) public charities, whether or not they have to file, um, with the IRS.

Dan Martel 09:16

Got it. Ah, interesting. Okay.

Laura Moon 09:17

A public, a local public school a donor-advised fund isn't allowed to receive those, but a donor-designated fund, which we also hold and distribute from at the OCCF, are allowed to receive those distributions.  

Dan Martel 09:31

All right. So yeah, definitely some restrictions and some rules that you need to know about before you decide, “Hey, I'm going to, I want to pull some money out of my IRA.” So, you’ve got to do a little bit of research if you're interested in doing that. But I mean, just imagine the impact that one can make if, if they are allowed to do that, which is kind of cool. Later in, in, in this podcast, we're going to be speaking to one of the donors at OCCF, Mr. Richard Opdyke. 

Julie Dais 09:54

Yes. 

Dan Martel 09:54

You know, Richard. 

Julie Dais 09:55

Yes. 

Dan Martel 09:55

And I know that he set up something like this. Tell me a little bit about what he did.  

Julie Dais 10:00

Now, Laura, this might have been before my time. Did you work with him?  

Laura Moon 10:03

No, that would've actually been Megan Hornbeek. Our, our scholarship department is able to establish scholarships that can receive qualified charitable distributions easily because there is no advisement for a scholarship fund. We also have a number of other funds that are like that. So, if it isn't a specific charity that you want to support directly with cash in hand, if maybe you want to support their endowment or a scholarship fund, those can also receive qualified charitable distributions a little bit more straightforward, And we have a great scholarship team that can work with you and decide what type of student you want to support for that scholarship.  

Dan Martel 10:40

How popular are QCDs?  

Julie Dais 10:42

Well, obviously we, this is a topic that comes up quite a bit. So, I asked Joe Carter, my boss, the other day; he is actually seeing that the use of the QCD grow in terms of that philanthropy. So, it is a very popular mechanism.  

Dan Martel 10:59

Excellent. Well, that's good to know.  

Julie Dais 11:00

One thing that I wish advisors knew, a lot of them don't realize the impact of how a QCD can reduce that taxable estate and the high taxed aspect of an IRA. So, I wish advisors knew how much of an impact that they could make when they work with their client and they work with us and the influence that they have.  

Dan Martel 11:24

So, let me ask, let's say I've got $500,000 in an IRA. 

Julie Dais 11:29

Okay. 

Dan Martel 11:29

And let's say I decide, all right, I'm going to be 70 ½ in two months, so I've got $500,000 sitting in my, is it, could it be either a, a traditional IRA or a Roth IRA? Does it matter? 

Julie Dais 11:42

Well, Roth has already had, it's been, it's pre-tax. It's a qualified plan. All right. And I know that there are different requirements for a 401B. So, you do need to check with your advisor on that. I'm talking traditional IRA.  

Dan Martel 11:53

All right. So, let's talk about that. 

Julie Dais 11:54

Okay. 

Dan Martel 11:54

I have $500,000, if I'm a donor in my traditional IRA, and I'm about to be 70 ½, and there's a favorite charity here in Oklahoma City that I'm interested in, in supporting.

Julie Dais 12:05

Right. 

Dan Martel 12:05

And I decide to go to the Oklahoma City Community Foundation and say, “Hey, I'm really looking forward to making a contribution.” How does that process work?  

Laura Moon 12:14

The way that we would set up a fund that can distribute those qualified charitable distributions is that we would get with you, figure out how you want to support that charity. Perhaps you want to send $10,000, but you don't want to send $10,000 all at once, and you want to send it, you know, $2,500 at a time. We'd get with you. Figure out how you want to distribute those funds if it's every six months, if it's quarterly, and for whatever program that you want to support at that charity. Alternatively, if you want to support that charity's endowment, we have over 390 local nonprofit endowment funds that we hold. So, you can maybe distribute directly into their endowment fund. Alternatively, if it's a cause that you're more concerned about,  

Dan Martel 12:52

Absolutely. Sure.

Laura Moon 12:52

You could support one of our iFunds. We have a number of iFunds that support causes around the Oklahoma City community. So, you can use those QCDs by partnering with the Oklahoma City Community Foundation in a number of different ways to support charities and local efforts.  

Dan Martel 13:08

Good to know. Well, I'm… Listen, you guys have been really, really helpful and have, I guess given our, our listeners some really valuable tips on, on how they can make an impact in the community by using something called a QCD, Qualified Charitable Distribution, I want to thank both you, Julie Dais, and you, Laura Moon, of the Community Foundation here in Oklahoma City for being on the podcast today. What's the best way for somebody to get in touch with one of your staff here at OCCF?  

Laura Moon 13:37

You can get in contact with us online at occf.org, or you can call us at our main number, (405) 235-5603.  

Dan Martel 13:46

Excellent. All right. Well, listen, I think that you guys have given us some incredible information on qualified charitable distributions. And we really appreciate your insight. Thanks for being here. 

Laura Moon 13:57 

Yeah, of course. Thank you.

Julie Dais 13:57 

Thank you for having us. 

Dan Martel 14:00

Our next guest is Richard Opdyke. Mr. Opdyke is a longtime donor who has taken advantage of making QCDs, and we'd like to get his thoughts on why he likes to support his favorite charities this way. Richard Opdyke, welcome to Creating Impact Through Giving. 

Richard Opdyke 14:13

Well, thank you. 

Dan Martel 14:14

So, first thing I want to do Mr. Dyke is, is ask you, how did you learn about qualified charitable distributions? What, what, how did that come to be?  

Richard Opdyke 14:23

Well, we met with a financial advisor. My wife and I were trying to get ready for retirement, and we got a hold of a financial advisor. And my wife was interested in giving something back. She was an RN, and she was thinking about maybe starting a scholarship. Well, we didn't know anything about how to do this. Anyway, the financial advisor intro introduced us to Joe Carter. He came up and he set out a program on what the Foundation does and how could, how we, it would affect us.  

Dan Martel 14:59

Sure. Absolutely. What attracted you then to decide to support your favorite charities by making a qualified charitable distribution?  

Richard Opdyke 15:06

Well, as I said my wife wanted to give back. And the program as outlined by Joe was exactly what she was looking for. And so, we talked about setting something up. However, it never got around to it because my wife passed, and probably about two or three months after her passing, I was thinking to myself, you know, I need to get started on this. And that's how I got involved in using the Foundation to set up the scholarship. 

Dan Martel 15:39

Okay. 

Richard Opdyke 15:39

And they were very, they were very, very helpful in doing this.  

Dan Martel 15:42

Fantastic. You know, one of the things that I'm getting from you guys is that you, you like to give back. You guys are the type that like to give back to the community and, and make things happen. And I, let's talk a little bit about that. Why, why is that?

Richard Opdyke 15:53

Well, she wanted to give back because one, when she went to nursing school, she was on a scholarship. And so, she decided that, you know, it happened to me, I want to pay it back. Well, after her passing, I decided that, you know, it's time to get off my, my butt and get something done cuz I promised her

Dan Martel 16:14

Yeah. 

Richard Opdyke 16:14

That we would do something. And so, I initially started with two nursing scholarships, and that was from the first RMD both from her and my retirement account. And that's how we got started. And as I say, the Foundation has really helped us along, guiding us on what would work and what wouldn't.  

Dan Martel 16:35

That is outstanding. What's the name of the scholarship? That…  

Richard Opdyke 16:38

It's the Laurene Ann Opdyke Nursing Scholarship.  

Dan Martel 16:42

Okay. And this is for future nurses out there.  

Richard Opdyke 16:45

It's for future nurses. It's pretty broad in that we didn't put a lot, I didn't put a lot of, of requirements onto, onto the scholarship. One, you had to have a 3.0 average. You had to write a, an essay on why you wanted to be a nurse. 

Dan Martel 17:04

Absolutely. 

Richard Opdyke 17:05 

And the third restriction was juniors or seniors. Cause I figured as a freshman or sophomore you weren't really committed.  

Dan Martel 17:15

Absolutely. That's right. Yeah.

Richard Opdyke 17:15

So, so anyway, the other thing was that there was no requirement on resident state residency and no requirement on where to go to school. So, you could, you could be a resident of Florida and go to school in Montana.   

Dan Martel 17:30

Got it. All right. So, it's a little broad and, and this is fantastic. So, and you were able to do all of this with funds from your retirement account, correct? 

Richard Opdyke 17:39

That is correct. 

Dan Martel 17:40

That's, that's a, a great way to do things and a great way to open up opportunities for people and give back, as you said earlier. You know, I know you worked with Joe Carter and some of his team through your professional advisor. How has that experience been Mr. Opdyke working with the Foundation and, and tell me how that that process went?  

Richard Opdyke 17:59

Well, I can just sum it up in one word. 

Dan Martel 18:00

Okay. 

Richard Opdyke 18:01

Extremely positive. Anything that I wanted to do, somebody would listen. And if it could be done, it was, it was done.  

Dan Martel 18:08

And so, you started this after your wife passed. And this thing has been going strong ever since. How's it working?  

Richard Opdyke 18:16 

Excellent. Excellent. I have no complaints. As I say that anytime I call down here, I get nothing but positive feedback and if I have any questions, everything is just answered to more than my satisfaction.  

Dan Martel 18:31

Excellent. I was going to ask you, before you actually, you set this up, did you have any idea that you could actually take funds from your IRA and, and, and turn this into something?  

Richard Opdyke 18:41

Yes, I did. 

Dan Martel 18:42

Okay. 

Richard Opdyke 18:42

I knew that prior to. Our thing, my thing and my wife, when we were talking about this is just how to do it. We knew that we could do it, but we were trying to decide where the money would go.  

Dan Martel 18:54

Okay. Anything else about other charities that you might be interested in or do you want to continue to focus in on this nursing scholarship? 

Richard Opdyke 19:03 

Well, right now, I'd just like to concentrate on the nursing scholarship just to make sure that it's successful and the people that enroll in this are successful.  

Dan Martel 19:11

Well, it sounds like you've been a, a mentor to a lot of people, and it's kind of one of those angel deals where a lot of people get this scholarship. They may not even know who you are. <laugh>. Exactly. This is Mr. Opdyke. If you can't see it is doing some angel wings for us right now. But man, we really appreciate you spending some time with us really talking about your experiences making qualified charitable distributions through your IRA. Man, we really appreciate you Mr. Opdyke, being on our podcast today. Thanks for being here.  

Richard Opdyke 19:40

Sure. My pleasure.  

Dan Martel 19:42

Well, that about wraps it up for us today. I want to thank all of you for listening, and we hope that we were able to bring some new light to this unique way of giving to your favorite charity by making a qualified charitable distribution through your IRA. Next month, join us again and we're going to have a special one-on-one conversation with the Oklahoma City Community Foundation's new CEO, Trisha Finnegan. You know, Trisha has now been with the Foundation for a little over six months, and we'd like to share some information with you on what she has learned about our community, how she'll continue to move the Community Foundation in a new direction and the exciting and rewarding things that are happening all around us. 

I'd like to thank Julie Dais and Laura Moon of the Oklahoma City Community Foundation for being our guests today as well as Mr. Richard Opdyke, one of our very generous donors to the Foundation. And until then, I'm Dan Martel. We'll see you again on Creating Impact Through Giving.