Clients can gift required minimum distributions (RMDs) to charity via a qualified charitable distribution (QCD) and convert an equivalent amount (or less) to a Roth IRA. Is it possible to supersize that strategy?
In my post on June 7 titled Managing IRA RMDs with QCDs and Roth Conversions, I identified two strategies: Gift required minimum distributions (RMDs) to charity via a qualified charitable distribution (QCD) and convert an equivalent amount (or less) to a Roth IRA as a “tax neutral” play to manage traditional IRA payments that are neither wanted nor needed. I then started thinking . . . could it be possible to supersize the strategy?
Qualified longevity annuity contracts (QLACs) may augment the strategy positioned in the previous post. A QLAC may allow an IRA owner to:
When future QLAC payments begin, they serve as the RMDs for the funds in the IRA QLAC. Lastly, if the IRA QLAC owner is truly charitably inclined, he/she may even name a charity as the primary or contingent beneficiary of the QLAC to receive the return-of-premium death benefit (if offered).
Forced RMD payments from traditional IRAs may present tax and other headaches for IRA owners. Folks who neither need nor want these RMD payments are looking for planning ideas to satisfy the requirements while accomplishing other planning goals. Charitable gifting of RMDs, later-life income through QLACs, and legacy planning using Roth IRAs may fit one or more of these goals.
For additional information about QCDs, RMDs, Roth IRA conversions, and QLACs, please contact the Retirement Strategies Group at (800) 722-2333, extension 3939, or email us at RSG@PacificLife.com.
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