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Professional Advisor Newsletter
May 2023
Background: Hot air balloons flying - Caption: Understanding the trifecta of tax benefits

Over the last few months, many advisors have noticed an uptick in client inquiries about leaving their IRAs and other retirement plans to charity. If you’re wondering why, it likely has a lot to do with the buzz about Qualified Charitable Distributions (QCD), which allow those who’ve reached the age of 70 ½ to direct up to $100,000 annually to qualified charities, which include a Designated Fund or a Forever Idaho Fund at the Idaho Community Foundation, avoiding both the need for an RMD (if they’ve reached age 73) and the income tax hit. 

It’s probably more than just the QCD, though, that has spurred your clients to ask questions. More and more, charitable planning with IRAs and other qualified retirement plans is a topic in financial and mainstream media. A case in point is a September 2022 article in the Wall Street Journal, irresistibly titled “Win an Income-Tax Trifecta With Charitable Donations.” If you subscribe to the Wall Street Journal, the article is well worth your time. 

When your client names a public charity, such as a Donor Advised Fund or other charitable giving fund at Idaho Community Foundation, as the beneficiary of a traditional IRA or qualified employer retirement plan, your client achieves extremely tax-efficient results. Here’s why:  

First, the client achieved tax benefits over time as the client contributed money to a traditional IRA (or to an employer-sponsored plan). That’s because contributions to certain retirement plans are what the IRS considers “pre-tax”; your client does not pay income tax on the money used to make those contributions (subject to annual limits).

Second, assets in IRAs and qualified retirement plans grow tax free inside the plan. In other words, the client is not paying taxes on the income generated by those assets before distributions start in retirement years. This allows these accounts to grow rapidly. 

Third, when a client leaves a traditional IRA or qualified plan to a charitable giving fund at ICF or another charity upon death, the charity does not pay income taxes (or estate taxes) on those assets. By contrast, if the client were to name children as beneficiaries of an IRA, for example, those IRA distributions to the children are subject to income tax, and that tax can be hefty given the tax treatment of inherited IRAs

So, if your client is deciding how to dispose of stock and an IRA in the client’s estate plan, intending to leave one to children and the other to charity, leaving the IRA to charity and the stock to children is a no-brainer. Remember, the client’s stock owned outside of an IRA gets the “step-up in basis” when the client dies, which means that the children won’t pay capital gains taxes on the pre-death appreciation of that asset when they sell it. 

Here’s the net-net:

Traditional IRAs are often poor vehicles for your clients to use to leave a family legacy. Instead, if a client is charitably inclined, traditional IRAs are likely better deployed to posthumous philanthropy if other assets, such as appreciated stock, are available to leave to children and other heirs. 

Idaho Community Foundation is always happy to work with you to ensure that your clients are maximizing their assets to fulfill their charitable giving goals. 

Background: Megan - Caption: Congratulations, Megan - our newest CPA!

Congratulations to our Accounting Manager Megan Perez, who recently earned her Certified Public Accountant designation, fulfilling a goal she’d had since her senior year of high school.

Megan committed to the process – which includes many hours of review, study and a series of exams that each focus on a different accounting emphasis – in 2020. The pandemic scuttled her plans that year, but she resumed her studies in summer 2021 and passed her first exam in January 2022.

As a CPA, Megan said her advanced knowledge of accounting procedures strengthens her ability to steward ICF fundholders and donors, and to play a key role in the complex accounting matters involving the community foundation’s more than 670 charitable giving funds.

In addition to support from her family as she spent many hours studying each week, Megan said she also appreciates the encouragement she received from ICF leadership.

“It is a big motivator when you have an employer who truly wants you to succeed and does anything they can to help you do so,” she said. “I couldn’t have done it without ICF’s support and encouragement.”


For more information about ICF, please contact us:

Kris Kamann Rich Ballou Background: Peter Faucher standing in front of brick building Clark Hyvonen
Kris Kamann
Senior Philanthropic Advisor
(208) 342-3535 x14
Rich Ballou
Philanthropic Advisor
(208) 342-3535 x22
Peter Faucher
Philanthropic Advisor
(208) 342-3535 x23
Clark Hyvonen
Philanthropic Advisor
Southwest/South Central
(208) 342-3535 x28

The team at the Idaho Community Foundation is a resource and sounding board as you serve your philanthropic clients. We understand the charitable side of the equation and are happy to serve as a resource as you manage the primary relationship with your clients. This newsletter is provided for informational purposes only. It is not intended as legal, accounting or financial planning advice.  

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Idaho Community Foundation
210 West State Street  •  Boise, ID 83702
Phone: 208.342.3535  |  Fax: 208.342.3577  |  Email: info@idahocf.org