Will Surge in IRA Gifts Continue Amid Pandemic?

President Trump signed the Cares Act into law on March 27, initiating a cascade of relief programs for individuals, small businesses, and nonprofits — including measures to keep staff on payroll and broaden eligibility for disaster loans. In an effort to provide tax relief for individuals, the law also included a one-year freeze on the mandate that IRA holders age 72 and older make a minimum annual withdrawal from their retirement accounts.

Some fundraisers are eyeing whether the required minimum distribution waiver will discourage giving from retirement accounts.

These qualified charitable deductions, or QCDs, grew in popularity while the stock market soared in recent years and the population of IRA holders age 72 and older swelled.

For now, the future for these gifts doesn’t look too bleak. FreeWill, a company that offers online estate-planning tools for individuals and planned-giving services for nonprofits, noticed that nonprofits used its services to process more QCD gifts the week after the Cares Act passed than at any other time during the first quarter of the year.

Even so, some nonprofits are hedging the bets they’d placed on these gifts. The aid organization Humans Rights Watch had planned a marketing blitz to educate supporters on QCDs this year. After the nation began sheltering in place, however, the charity shifted its strategy and canceled a direct-mail campaign on QCDs that was scheduled for late March.

Now, Human Rights Watch is focused on keeping relationships with its current donors strong — emphasizing the value of its mission rather than the different mechanisms donors can use to give. “Right now, the ‘why’ is much more important than the ‘how,’ ” said Brian Peterson, director of legacy and gift planning at the charity.

The charity is bracing for a drop in QCD gifts, according to Peterson, but not just because of the Cares Act waiver. The roiling stock market ended years of growth in IRAs, and these lost assets will have a much greater impact on how donors give, Peterson said.

If there is a decrease in QCD gifts, Jenny Xia Spradling, co-founder of FreeWill, doesn’t expect it to be big. Donors may be inclined to keep giving this way because the money doesn’t come out of their income, and the gifts also entitle them to a tax deduction, she said.

The Kalamazoo Community Foundation had planned to build local awareness of the giving method with an April seminar on QCD regulations for local financial advisers and lawyers. Now the foundation’s staff is more focused on recruiting gifts from donor-advised funds instead, said Joanna Donnelly Dales, vice president for donor relations.

The foundation has launched a joint fundraising effort with the local United Way to support the Covid-19 relief. To date, no donors have offered QCD gifts to the foundation in response to the pandemic.

“Community foundations are about endowments. But in this extraordinary time, we are trying to just assemble as much resources as we can and get it out really quickly into the community,” Dales said.

Like Peterson, Dales expects that drops in the stock market will influence whether donors choose to give QCD gifts. “I think people have just been watching their assets plummet and so are afraid to use them,” Dales said. Big donors, those who won’t feel the economic squeeze as much, may still make QCD gifts, but midlevel donors who had a tax incentive to make a bigger gift with their requirement minimum deduction may hold off on giving that way this year, she added.

While her expectations for QCD gifts are low this year, Dales said the foundation still sent an email to its network of local financial advisers and lawyers, reminding them that their clients could support the foundation’s Covid response with a QCD gift. “We’re talking about it,” she said. “We’ll see what comes of that.”