Most attorneys, accountants, and financial advisors are well aware of Donor Advised Funds and the reasons behind their popularity. When a Donor Advised Fund is established at the Community Foundation of Anne Arundel County, this vehicle is an excellent way for your clients to organize their charitable giving and become more connected to the causes they care about.

Enter the Qualified Charitable Distribution

Your clients can give nearly any type of asset to a Donor Advised Fund at CFAAC. A notable exception, though, is the Qualified Charitable Distribution (QCD). A QCD allows a taxpayer 70 ½ or older to make a direct transfer of up to $100,000 annually from an IRA to a qualifying nonprofit organization. A Donor Advised Fund is not considered to be a qualifying nonprofit organization.

Although Donor Advised Funds cannot accept QCDs, CFAAC offers other types of funds that can accept QCDs. For example, Designated Funds and Field of Interest Funds held at CFAAC are ideal recipients of QCD transfers. These fund types are often overlooked, despite the high value they can deliver to your client and to the community.

What is a Field of Interest Fund?

The Council on Foundations defines a Field of Interest Fund as, “A fund held by a community foundation that is used for a specific charitable purpose such as education or health research.” Perhaps your client is passionate about the environment, feeding the food insecure, or preserving works of art, for example. Your client selects the name of the fund (family, cause-related, or even nondescript) and then, our knowledgeable team at the Community Foundation distributes grants from the Field of Interest Fund in a way that is aligned with your client’s values and charitable wishes outlined in the fund documentation.

What is a Designated Fund?

Designated Funds are defined as, “A type of restricted fund in which the fund beneficiaries are specified by the grantors.” These are a good choice for a client who knows they want to support a particular nonprofit or nonprofits for multiple years. The client names the fund and CFAAC fulfills the distributions. Made over time, these funds can help the nonprofits’ cash flow planning. Distributions are aligned with your client’s wishes set forth in the original fund document.

QCD reminders

For the client aged 70 ½ through 72, a QCD removes funds from an IRA before the client reaches the age-73 threshold for Required Minimum Distributions (RMDs). This can lessen the eventual income tax hit that accompanies RMDs. And for RMD-applicable clients, the QCD counts toward their RMD. In both cases, the QCD transfers do not fall into the client’s taxable income.

QCDs are even more popular now that the $100,000 cap will be indexed for inflation under the new laws. Also, under the new laws, a one-time, $50,000 distribution to a charitable remainder trust or charitable gift annuity is now permitted.