09 Nov Can my 401(k) give to charity?

Q. Can a Required Minimum Distribution from a 401(k) plan be paid directly to charity?
— Giver

A. We love that you’re interested in giving to charity, but you’re going to have to take some extra steps if you want to give your Required Minimum Distributions (RMDs) to a good cause.

The only account types that are eligible for the Qualified Charitable Distribution (QCD) are from IRAs, Inherited IRAs, SEP IRAs only in inactive plans, and SIMPLE IRAs, again only for inactive plans, said Jody D’Agostini, a certified financial planner with AXA Advisors/The Falcon Financial Group in Morristown.

“If you are taking Required Minimum Distributions at age 70 1/2 and want to contribute to a charity and you have a desire to avoid income taxation, you will need to first roll over your 401(k) to an IRA,” D’Agostini said. “This may keep you from a higher tax bracket and could qualify you for certain tax credits and deductions.”

D’Agostini said there needs to be a direct transfer from the IRA custodian payable to a qualified charity. She said Congress permanently allowed this provision in 2015.

Certain requirements must be met to make the contribution.

“You must be at least 70 1/2 at the time you request the QCD, and the funds must go to the charity before Dec. 31 of that year,” she said. “The check must be made directly to the charity, not to the individual.”

And right now, D’Agostini said, donor advised funds and private foundations do not qualify for QCDs.

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This post was first published in November 2016.