Apples and oranges: Lifetime and legacy giving with IRAs

Retirement assets are becoming an increasingly important part of charitable planning. Americans hold more than $50 trillion in retirement accounts—nearly $20 trillion of which are held in IRAs. Meanwhile, the Great Wealth Transfer is underway, with more than $120 trillion expected to change hands over the coming decades.

In light of these trends, it is especially important for estate planning attorneys, CPAs, and financial advisors to remind clients that IRAs in particular offer two distinct charitable planning opportunities. Why? Because:

• Clients may blur the two opportunities together.

• Clients may know about one opportunity but not the other.

• Clients may simply not realize that IRAs and other retirement assets can play a role in their charitable plans at all.

So what are these opportunities, in plain language that you can use with your clients? Here’s a primer:

Lifetime giving opportunities for clients age 70½ and older

You’re likely well aware that a client age 70½ or older may make a Qualified Charitable Distribution (QCD) directly from an IRA to a qualified charity, including some types of funds at The Erie Community Foundation (but not a donor-advised fund, although pending legislation could change that). In 2026, the inflation-adjusted QCD limit is $111,000 per taxpayer.

QCDs can become particularly relevant for a client when required minimum distributions begin, currently at age 73 for many clients. A QCD can count toward a client’s RMD while still excluding the distributed amount from taxable income, assuming applicable requirements are met. But there is no need to wait until RMD age to begin the conversation. The QCD opportunity begins at 70½.

Under current law, QCDs generally must come from IRAs; distributions directly from employer-sponsored retirement plans such as 401(k)s and 403(b)s do not qualify, although proposed legislation could change that.

For additional insights into QCDs and how they can support charitable giving during retirement, explore our related article.

Legacy giving opportunity for clients of all ages

You know quite well that a client can name a charity (including a donor-advised fund at The Erie Community Foundation) as the beneficiary of an IRA or other type of eligible retirement plan, allowing some or all of the assets remaining in the account at death to pass to charity.

The designation itself is relatively simple, and it can be incorporated into a client’s overall estate and charitable planning without necessarily changing the client’s current lifetime giving.

This technique is especially useful because retirement plan assets passing to a charitable beneficiary typically are not subject to the income tax that generally applies when heirs receive taxable distributions from inherited traditional IRAs and retirement plans.

Through legacy planning, The Erie Community Foundation can help clients create a lasting impact that reflects their values and supports the causes they care about for generations to come.

So what’s the issue?

Clients sometimes do not realize that these opportunities are independent of one another. One client might use QCDs to support favorite charities throughout retirement and also name a charity as the beneficiary of some or all of a retirement account. Another client may have little interest in lifetime IRA giving but find the beneficiary designation compelling as part of a legacy plan.

That’s why this should not be a one-and-done conversation. Retirement balances change. Charitable interests evolve. Clients reach new ages and life stages. Estate plans get updated. And a client who wasn’t ready to consider one of these strategies the last time you discussed charitable giving may be ready now.

As retirement assets continue to grow and the Great Wealth Transfer accelerates, consider making two questions a regular part of conversations with charitably inclined clients:

• If you’re 70½ or older, could your IRA help support the causes you care about during your lifetime?

• Could your retirement assets play a role in the legacy you ultimately leave behind?

Keep your eyes on pending legislation that might expand the ways your clients can use QCDs. Congress is considering two bipartisan charitable giving proposals: the Charity Parity Act, which would permit QCDs directly from employer-sponsored retirement plans, such as 401(k)s, in addition to traditional IRAs, and the IRA Charitable Rollover Facilitation and Enhancement Act, which would extend QCD eligibility to donor-advised funds.

As of the draft’s preparation, neither proposal had advanced beyond committee. If enacted, these proposals could expand charitable giving options for clients.

We’re Here to Help

Your client does not need to have every detail decided before beginning the conversation. We would be happy to sit down with you and your client, listen to what matters most to them and explore options that fit with the financial and estate-planning work already underway.

We respect the relationship you have built with your client and see our role as a partner in the charitable planning process.

Together, we can help your clients inspire generosity, engage the people and causes they care about, and empower communities across our region, today and tomorrow.

For more information, contact Steve Weiser, Vice President of Philanthropic Services, at SWeiser@ErieCommunityFoundation.org or 814.413.7345.

The Erie Community Foundation does not provide legal, tax or financial advice. Donors should consult their professional advisors to determine how charitable strategies may apply to their individual circumstances.