Most attorneys, accountants, and financial advisors are well-aware of donor-advised funds and the reasons behind their popularity. Especially when a donor-advised fund is established at the North Carolina Community Foundation, this vehicle is an excellent way for your clients to organize their charitable giving and get even 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 the North Carolina Community Foundation. A notable exception, though, is the Qualified Charitable Distribution. 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 charity. A donor-advised fund is not considered to be a qualifying charity.  

Although donor-advised funds cannot accept QCDs, NCCF offers many other types of funds that can accept QCDs.

Designated funds, field-of-interest funds, scholarships and other community grantmaking funds held at NCCF 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 designated fund?

Designated funds are defined by the Council on Foundations as “a 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 charity or charities for multiple years. The client specifies the grantee, names the fund and we fulfill the distributions. Made over time, these funds can help the nonprofit organization with cash flow planning. Distributions are aligned with your client’s wishes outlined in the original fund document. 

What is a field of interest fund?

A field of interest fund is defined as “a fund held by a community foundation used for a specific charitable purpose such as education or health research.”  Perhaps your client is passionate about rare-disease solutions, feeding the food insecure or preserving works of art, for example. Your client selects the name of the fund, and the knowledgeable team at NCCF 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 scholarship fund?

A scholarship fund provides support for those seeking to further their education. Your client may wish to help North Carolina students have access to quality education and learning opportunities, which in turn help create and sustain healthy communities. The client may specify students from a particular area or school, or students pursuing a degree in a particular field of study. NCCF appoints the selection committee and awards the scholarships in line with the client’s interests described in the fund agreement.

Community grantmaking or “unrestricted” fund 

A client may also choose to make a QCD to one of the NCCF’s local grantmaking funds, established to benefit needs in counties where NCCF hosts a local affiliate advisory board. These funds give the local affiliate board of advisors the flexibility to respond quickly to emerging needs and changing priorities within its community.

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. 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. 

This article is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.