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The Weekend Briefing

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“The SECURE Act? What’s that?”
 
Exactly!
 
Do you remember, 2-3 years ago, when the Qualified Charitable Distribution provision from an IRA was made permanent?  It received a huge amount of buzz.
 
Not so this very important legislation, which was signed into law on December 21 and took effect January 1.
 
The acronym stands for “Setting Every Community Up for Retirement Enhancement” and despite the lame title, many are calling it the most significant update to retirement security since the Pension Protection Act of 2006.
 
Here’s what you need to know: The SECURE Act:
 
Increases the age when an IRA owner must take a Required Minimum Distribution, from 70½ to 72.
 
Keeps the age when a Qualified Charitable Distribution is allowed at 70½.
 
There is no age limit now for contributions to a traditional IRA. (There never was an age limit for contributions to a Roth IRA.)
 
And last, the SECURE Act modifies the stretch IRA provisions.
 
Huh?
 
I know. It sounds complicated, but it’s not. Here’s how it works.
 
In the past, when an IRA owner passed away, the beneficiary of that IRA could “stretch” the distributions over his or her lifetime.
 
For example, if the beneficiary was a 30 year old grandchild, he or she could take withdrawals for approximately 53 years (the person’s lifetime according to IRS life expectancy tables).
 
The provisions of the SECURE Act still allow a spouse (as the IRA beneficiary) to stretch withdrawals over a lifetime. However, all other beneficiaries must fully deplete the IRA within ten years.
 
NOTE: There are four exceptions to this, but it’s too much detail to go into here. You can Google “SECURE Act 2020” and find a very thorough explanation on MarketWatch.
 
Now, it’s one thing to know about this new law. It’s another thing to effectively communicate it to your donors.
 
What you read, pretty much everywhere else is, “tell your donors” or “share this with your donors.”
 
But how?  How you do that, matters.
 
Every gifts officer I know is looking for an excuse to call a donor.  Something to talk about. After a while, “How ‘bout them Cubs!” gets a little tiresome to the donor.
 
The chances are pretty good many of your donors haven’t heard about the SECURE Act. It’s a great opportunity to reach out. Either with a phone call, on a visit, or with an Executive Summary of the Act on one sheet of paper, with a handwritten note attached. (Be sure to hand address the envelope, and add a live stamp.)
 
You can advise your Board and your Professional Advisory Council, too. Add the Summary to the Planned Giving section of your website. And, to the News section of your organization’s website.
 
That you are up-to-speed on these changes reflects well on you to donors, Board, and to your boss.
 
What if your donor does not want the beneficiary to be forced to fully deplete the IRA in ten years? Here’s an idea:
 
Instead of naming that individual as the beneficiary of the IRA, encourage the current IRA owner to name a Charitable Remainder Trust as the beneficiary, and then the loved one as beneficiary of the Trust. (It is a good idea to encourage, or insist, on a term limit of 20 years for the Trust.) Once the Trust income to the beneficiary is completed, as always, the remaining principal of the Trust reverts to the nonprofit organization, or it can revert to a Donor Advised Fund.
 
I’ve even read planned giving experts who suggest the IRA owner consider leaving the IRA proceeds to a Charitable Remainder Trust for a spousal beneficiary.
 
Pretty good stuff, I’d say.
 
One thing to know the information, another to know how to effectively use it.
--
The most thought-provoking thing I read over the holidays:
 
“One of the biggest obstacles to trust is trying to move too fast in a relationship.”
 
How do we get our donors to trust us?  We’ll talk about that next week.
 
Until then have a good week, my friends.
 
RC
Rob Cummings coaches gift officers, consults on capital campaigns and helps nonprofit organizations build strong, sustainable fundraising programs. You can reach him at: rcummings@theweekendbriefing.com
 


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