February 15, 2023

An individual retirement account (IRA) is a tax-advantaged retirement savings account. There are a few different types of IRA accounts, but the most popular by far is the traditional (pre-tax) IRA. Simply put: this type of account allows you to save a little bit each month during your working years, invest this money in the stock market tax-free, and create a substantial nest egg for retirement.

These types of vehicles are extremely common, so there’s a good chance that you or a loved one have an IRA that has been growing over the years.

What you might not know is that withdrawing these funds in retirement can sometimes lead to heavy tax consequences. Further, leaving these assets to your children or grandchildren after you’re gone can result in even heavier tax consequences for your heirs.

Luckily for you—and for the young people we serve here at Mercy Home—making charitable gifts from your IRA is one of the most tax-efficient ways to support your favorite charities. You can accomplish this in two ways: giving through a qualified charitable distribution in life, or leaving Mercy Home or other charities as a beneficiary designation when you’re gone.

Alphabet Soup: Satisfy Your RMD from Your IRA with a QCD

Some people find that they’ve saved much more for retirement than they’ll need. In fact, an IRA can sometimes become a tax burden, because you must take a required minimum distribution (RMD) from your account each year, beginning when you are 73 years old. This distribution will increase your taxable income, which may bump you into a higher tax bracket. In effect, this means less money for you, less for your favorite charities, and more for Uncle Sam.

But there is a way to satisfy your RMD requirements while lowering your taxes and supporting our work at Mercy Home: make use of the qualified charitable distribution (QCD) from your IRA. This is a direct donation from your IRA to a qualified charity, like Mercy Home.

Using the QCD method, you can satisfy all or part of your required minimum distribution without increasing your tax bill, and support your favorite charities at the same time. You can start giving QCD gifts as early as age 70 ½, you can contribute up to $100,000 each year, and you can make gifts to as many charities as you like. You’ll lower your adjusted gross income (and your tax bill), and your gift will support kids in need today!

Making a QCD gift is quick and easy. Simply contact your IRA administrator, and ask to make a “qualified charitable distribution” to Mercy Home from your IRA account. Please note that in order to receive charitable benefits, a QCD gift must come directly from your IRA to Mercy Home. Be sure to ask your administrator to add your name to the check so we can properly thank you for your generosity.

The Simplest Way to Leave a Legacy

For most people, the simplest way to leave a legacy gift is by naming a charity like Mercy Home as a beneficiary of one or more of your retirement accounts—like an IRA, 401(k), or 403(b).
Contrary to popular belief, most retirement plans are not governed by your will or trust. This means that even if you already have a will, you must also complete a beneficiary designation form for each of your retirement assets (including an IRA), indicating who should receive the funds after you are gone. The good news is that this is simple to do: just fill out a simple form in a few minutes (no attorneys or fees for you to pay).

You can name individuals as your beneficiaries. However, because these plans are heavily taxed when left to heirs other than your spouse, retirement accounts are terrific assets to leave to your favorite charity. Charities like Mercy Home are tax-exempt, which means that your full gift will be used to help children in need. It just might be the easiest (and wisest) way to make an extraordinary gift to charity!

To update the beneficiaries of your retirement account, just visit your plan’s website, or contact your plan administrator to find the beneficiary form. You will typically need only three pieces of information to name Mercy Home as a beneficiary of your retirement account:

Our legal name: “Mission of Our Lady of Mercy, Inc.”
Our tax ID number: 36-2171726
Our mailing address: 1140 W Jackson Blvd, Chicago, IL 60607

Giving from your IRA is one of the easiest ways to lower your tax bill and make a difference in the lives of our kids. Please reach out if you’d like to learn more about these kinds of gifts, or any other way that you can help create a brighter future for the young people at Mercy Home.