Introduction
Executive Summary
The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019, and subsequent modifications, represent a significant overhaul of U.S. retirement laws. This legislation has profound implications for charitable organizations and their planned giving strategies. This white paper provides a detailed analysis of the SECURE Act, focusing on its key provisions, their impact on planned giving, and how Wills.com offers a strategic advantage for both donors and charities in this evolving landscape. We will explore various strategies to mitigate challenges and also maximize opportunities for legacy gifts, and we will also demonstrate the value of a comprehensive approach to estate planning that is both ethical and practical. This white paper will serve as a valuable resource for any charitable organization that is looking to thrive in the current financial and legal environment. By understanding your options, you will be better positioned to make informed choices that will lead to more successful outcomes.
Introduction
The SECURE Act, codified primarily within Title I of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001 et seq., and relevant sections of the Internal Revenue Code (IRC), 26 U.S.C. § 1 et seq., fundamentally altered the landscape of retirement planning in the United States. These changes also have a trickle down effect that has greatly impacted the way that charities manage their long-term fundraising strategy, and specifically the way they engage with donors who are looking to give through planned giving options. The purpose of this white paper is to provide non-profit organizations with a more thorough understanding of the relevant components of the SECURE Act, and also to highlight the implications of these changes to legacy donations, and how they will be able to maximize the opportunities that are available. By understanding the intricate details of these laws, your charity will be in a better position to create a plan that best meets the needs of your supporters, while also protecting the interests of your organization for many years to come. It is essential that you stay up to date on the most current laws, and that you are also adapting your fundraising strategies to account for all of the new regulations that may be applicable to your donor base.
Key Provisions of the SECURE Act Affecting Planned Giving
The SECURE Act, and the SECURE 2.0 Act of 2022, include numerous provisions that will impact planned giving, and they must all be addressed in order to develop a sound long-term financial strategy. Here are some of the most relevant components:
- Increase in the Required Beginning Date (RBD) for Required Minimum Distributions (RMDs): The RBD for RMDs from traditional retirement accounts was increased from 70 1/2 to 72 (and now to 73, with a potential increase to 75), as per the SECURE Act (Pub. L. 116-94, § 107). This change allows individuals to defer taking distributions for a few more years, and it also impacts the timing of income tax obligations, and also any opportunities for charitable contributions through Qualified Charitable Distributions (QCDs). This means that you must also consider the time constraints of those who are now older than the traditional retirement age, and how you can best meet their unique planning needs.
- Elimination of the "Stretch" IRA: The SECURE Act eliminated the "stretch IRA" strategy for most non-spouse beneficiaries (Pub. L. 116-94, § 401). This rule requires most non-spouse beneficiaries to withdraw all funds from inherited retirement accounts within 10 years of the account holder's death. This has major tax implications, and it also underscores the value of creating a strategic approach to charitable gifting. You must be aware of the potential tax burden that this will now create for your donors, and also how it may change their giving choices.
- Qualified Charitable Distributions (QCDs): While not directly altered by the SECURE Act, the importance of Qualified Charitable Distributions (QCDs) from traditional IRAs is amplified as a result of other changes that were made in this piece of legislation. QCDs, which allow individuals 70 1/2 and older to donate up to $100,000 per year from their IRAs directly to qualified charities without paying income tax on the distribution (IRC Section 408(d)(8)), are now even more valuable, due to the new rules that limit the ability to stretch out required distributions over a beneficiary’s life expectancy. When those who are taking distributions from their IRAs are now subject to higher tax liabilities, QCDs are more attractive than ever before. You must take the time to educate your donors about this important opportunity.
- Increased Opportunities for Roth Conversions: The SECURE Act has also created new opportunities for Roth conversions, which are a strategy for transferring funds from traditional IRAs or 401ks to Roth IRAs. These conversions allow for more tax free income, and also more long term tax management opportunities. Because of these opportunities, some may choose to pass down Roth IRAs to their beneficiaries, instead of traditional retirement accounts, and they also may choose to use those funds for charitable bequests. These new options create new opportunities for planned giving, and you should also take the time to understand all aspects of the process.
Implications for Planned Giving Programs
The SECURE Act has complex implications for charitable organizations that rely on planned giving. Here are some important things you must consider when planning for the future of your mission:
- Accelerated Tax Liabilities for Beneficiaries: As most non-spouse beneficiaries now have to withdraw all assets from inherited retirement accounts within ten years, you must also recognize that they will face larger and more immediate tax liabilities than they would have before the new regulations went into effect. This new reality is likely to impact their decisions about future charitable donations, so you must make sure you are also educating them about all of their available opportunities.
- Greater Emphasis on Lifetime Giving: Charities may need to shift their emphasis to lifetime giving strategies, which means that you must create opportunities for donors to make significant donations during their lifetimes, rather than waiting for donations after they are gone. This approach also requires you to engage with your donors in a more consistent and meaningful way, to create relationships that will encourage both current and future donations.
- QCDs as a Strategic Fundraising Tool: Charities must also recognize the importance of QCDs, which can help them attract more donors over the age of 70 1/2, who are also more likely to be engaged in long-term planning for their legacy. You must provide them with the resources they need to make informed decisions about their giving, and also highlight the benefits of making a donation to your cause.
- Need for More Sophisticated Estate Planning: The complexities of the new laws will likely mean that more people will seek the advice of estate planning professionals who can also help to navigate these complicated issues, which will provide you with an opportunity to engage with both potential donors, and also legal professionals who may share your values and also support your charitable mission.
- New Marketing and Communication Strategies: Charities must also update their marketing materials and messaging to reflect all changes made in the SECURE Act, and also to best appeal to the target audience who are most likely to be interested in planned giving opportunities. You must also be strategic in your approach to outreach, and you must be willing to adapt with the times.
Strategies for Charities to Adapt and Thrive in the SECURE Act Landscape
To navigate the complexities of the SECURE Act and to maximize your planned giving opportunities, you must be proactive and strategic. Here are some essential strategies to consider:
- Provide Comprehensive Donor Education: Charities must educate their donors on the impact of the SECURE Act and its provisions, as well as all of the various gifting options that are available to them, and also to make sure that all of their questions are clearly answered by your team.
- Promote QCDs as a Smart Giving Option: Clearly articulate the benefits of QCDs to donors over the age of 70 1/2 as a valuable tool for both reducing their tax burden, and also making a gift to their favorite charitable organization.
- Offer Various Planned Giving Vehicles: Provide your donors with a range of options for planned giving, and also help them understand the differences between a bequest in a will, charitable gift annuities, or charitable trusts, and also all of the various ways that they may choose to give.
- Highlight the Tax Benefits of Charitable Bequests: Emphasize the tax benefits of making a planned gift to your organization, and always be clear about the long term value of this type of donation, not only for your organization but also for the donor and their family.
- Partner With Estate Planning Professionals: Collaborate with attorneys, financial advisors, and other professionals to help your donors navigate the complexities of estate planning, and also to help them make informed decisions that will benefit both their personal finances and your charitable mission.
- Leverage Wills.com: Partner with platforms like Wills.com to streamline the process for donors who want to include a bequest in their wills or trusts, and to also be sure that your charity’s information is readily accessible to all who are planning their estate.
- Create a Legacy Giving Program: Establish a comprehensive legacy giving program that will not only acknowledge and appreciate legacy donors, but will also build deeper relationships with them that will encourage further planned gifts.
- Utilize Data for Refinement: Leverage available data to understand your donors, to track your success, and to also refine all of your strategies based on what is working, and what can be further improved, so that you are always maximizing your reach and your overall potential.
Wills.com: A Strategic Partner for Planned Giving in the SECURE Act Era
Wills.com offers a unique and valuable approach to planned giving that is designed to specifically address all of the complexities created by the SECURE Act. Here's how Wills.com can benefit your organization:
- Simplifies Will Creation: Wills.com makes it easy for donors to create legally sound wills and also to incorporate all of their charitable intentions.
- Facilitates Bequests: The platform provides a simple and straightforward process for donors to include your organization in their will or trust, while also ensuring that all of the information is accurate, and that the donor is confident in their choices.
- Connects You With Potential Donors: Wills.com connects your charity to a targeted audience of individuals who are actively planning their estates and looking for ways to make a positive impact on the world.
- Provides Educational Resources: Wills.com empowers both your organization and your donors with educational resources to help them understand planned giving and also to make well informed decisions that are best for all involved.
Conclusion: Navigating the Future of Planned Giving with Confidence
The SECURE Act has created a new environment for planned giving that requires non-profit organizations to adapt, adjust their strategies, and also embrace new and innovative ways to connect with their donors. By understanding the implications of the SECURE Act and by utilizing the tools and resources that are available to you through Wills.com, your charity can position itself for long term financial stability and also to create a more sustainable and robust path for the future. You have the power to control your future, but you must always remain informed, agile, and proactive in order to meet the challenges of the ever-changing landscape of charitable giving. Wills.com is here to be your partner every step of the way and also to create a more sustainable and robust path for the future. You have the power to control your future, but you must always remain informed, agile, and proactive in order to meet the challenges of the ever-changing landscape of charitable giving. Wills.com is here to be your partner every step of the way
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