March 2, 2020 | Read Time: 3 minutes
Gifts to charities from individual retirements accounts continue to grow, according to a new study.
On average, charities reported a 67 percent increase in the number of IRA gifts they received in 2019. More than half of nonprofits said they’ve seen the size of those gifts increase.
Qualified charitable distributions, informally known as QCDs, allow donors to make tax-free gifts of up to $100,000 straight from their IRAs. Individuals are required to make a minimum withdrawal of funds from their accounts beginning at age 72, and contributions to charity can satisfy that requirement. That’s a change. A law passed in December raised the required minimum distribution age for IRAs from 70.5 to 72, effective January 1 of this year.
The report was produced by FreeWill, a company that provides online tools to help individuals plan their estates and nonprofits attract bequests and other planned gifts. The company surveyed more than 100 nonprofits over the last two years, asking them about their QCD gifts.
The growth in these gifts is likely driven by a few factors: greater awareness among IRA owners of the tax advantages of this form of giving, an increase in nonprofit marketing of IRA giving, and a growing number of older Americans.
“There are currently 10,000 baby boomers turning 70 every day,” the report says. “This makes 70- to 80-year-olds the fastest growing age bracket in the U.S. — the same age bracket that is eligible for QCDs. This age group will continue to grow dramatically over the next 10 years, providing unprecedented opportunities for nonprofits to attract valuable new donors.”
On average, nonprofits that responded to the survey said 46 percent of donors in their databases are over the age of 70.
Need for Information
The report also offers recommendations for how nonprofits can bring in more IRA gifts in 2020 and beyond.
Many donors find it confusing to give through their retirement accounts, the report says. Nonprofits would benefit from sending all their donors over age 70 information about how to make a QCD gift, including information about the tax benefits and changes in legislation.
Nonprofits should also make sure they’re able to track QCD gifts as they come in and continue to cultivate those donors. According to the survey, 58 percent of gifts from IRAs came from donors who had made those gifts before.
Among the other findings:
- The average QCD gift in 2019 was $7,900. The smallest average gift size reported by a nonprofit in the survey was $200 while the largest was $37,500.
- Men gave 67 percent of contributions on the FreeWill platform in 2019. The report’s authors say that’s a reflection of the demographics of white-collar workplaces when the baby-boomer generation began opening IRAs. Women, however, are likely to be give more of these types of donations in the future. In 2019, 80 percent of requests for more information on IRA beneficiary designations to nonprofits came from women.
- Nonprofits reported that on average 91 percent of their QCD gifts in 2019 came from previous donors.
- Half of the nonprofits said they marketed QCDs to their prospective donor lists three or more times in the past year. Seventy-six percent said they plan to increase their QCD marketing efforts in 2020.
