Continuing Progress on Legacy Planning Goals

You may have given estate and legacy gift planning some attention but may still have some unfinished business. We are happy to be a resource as you continue your estate and legacy gift planning journey.

1. 2026 CHARITABLE PLANNING TAX LAW HIGHLIGHTS

There are a few new rules in 2026 that donors should be aware of related to charitable giving. These rules should be carefully reviewed by donors and their advisors as they impact non-itemizers and itemizers alike.

1. IRAs AND Charitable Giving in 2026
   • An individual over age 70½ is permitted to make a direct transfer from his or her IRA custodian to a qualified charity up to $111,000 in 2026.
   • Learn more on our Give From Your IRA page.
   
   
2. 2026 New Charitable Tax Deduction for the 90% of People Taking the Standard Deduction – Donors taking the standard deduction, you now have a brand-new tax deduction that can help you stretch your giving!
   Taxpayers who take the standard deduction on their tax return are now allowed an above-the-line charitable deduction for a gift of cash to a qualified nonprofit, like United Way of Santa Barbara County, up to $1,000 for a single taxpayer or $2,000 for a married couple filing jointly starting in 2026.
   1. The new above-the-line deduction is not available for gifts to DAFs.
   2. This non-itemizer deduction may be taken in addition to the standard deduction and enhanced senior deductions.
   
   
3. 2026 Changes for Itemizing Taxpayers – Taxpayers who itemize their deductions for tax purposes have two big changes in 2026. Taxpayers are encouraged to speak with a tax professional to understand how the tax changes may impact their 2026 tax return.
   1. There is a new 0.5% floor on charitable deductions for gifts beginning in 2026. The taxpayer will not be able to deduct charitable gifts for the first 0.5% of the contribution base. The contribution base for most taxpayers is their adjusted gross income (AGI).
   2. In addition to the 0.5% charitable floor, there is a limitation on itemized deductions in 2026. This limit will impact high income earners because for taxpayers in the 37% bracket, the maximum savings for itemized deductions will be capped at 35%. To apply this limitation, deductions are reduced by 2/37 of the lesser of: the total itemized deductions or the portion of income above the 37% threshold.
   
   
4. 2026 has no new IRS written acknowledgement rules per Sec. 170(f)(8) of the tax code. As you make gifts using cash, check, credit card, or deductions from your paycheck, you will continue to need the items below. Consult your tax advisor for full details.
   • For cash, check, credit card or deductions from your paycheck gifts of all sizes:
     • a written record from the bank, the charity or a workplace giving document showing the name of the charity, the date of the contribution, and the amount of the contribution
   • Additional requirement for gifts over $250:
     • statement that no goods or services were provided by the organization, if that is the case OR
     • a description and good faith estimate of the value of goods or services, if any, that organization provided in return for the contribution

2. 2026 IRA UPDATES FOR QCD AGE, RMD AGE AND ANNUAL LIMIT

2026 IRA UPDATES FOR QCD AGE, RMD AGE AND ANNUAL LIMIT

A qualified charitable distribution (QCD) allows you to roll funds directly from your IRA to a qualified charity like United Way of Santa Barbara County. Those amounts can be used to satisfy your required minimum distributions (RMDs) for the year and the amount donated is excluded from your taxable income. You are not required to itemize to do this.

• The age when a current gift (QCD) from an IRA is allowed remains at 70½ in 2026. At 70½, you can make annual charitable gifts through your IRA. At your direction, your IRA custodian will transfer the gift you designate directly from your IRA to a qualified charity. This is known as a Qualified Charitable Distribution, or QCD.
• In 2026 the age at which you are REQUIRED to take a Required Minimum Distribution (RMD) remains at 73. The RMD age will increase again in 2033 to age 75. Individuals who are currently taking RMDs will continue to take a distribution each year based on their age.
• The annual IRA QCD limit increased to $111,000 in 2026.

3. LOSS OF STRETCH DISTRIBUTION ON MOST INHERITED IRAS

THE TESTAMENTARY CHARITIABLE REMAINDER UNITRUST MAY BE WORTH CONSIDERING

JULY 2023 UPDATE

If you long ago named your children as the beneficiaries of your IRA, you may want to revisit this decision with your financial advisor. Your heirs may end up paying higher taxes on the inheritance they receive because of the removal of the "Stretch Distribution".

The SECURE Act became effective on JANUARY 1, 2020. The "10-Year Distribution Rule" was created for most inherited IRAs where the owner passed January 1, 2020, or later. This resulted in requiring full distribution in 10 years for most beneficiaries who were adult children of the IRA owner, instead of over their entire lifetime. When the "10-Year-Distribution Rule" was created, it was not clear if the 10-year rule required any RMD for any of the calendar years except for the last year of the 10-year period.

Clarification was attempted by the IRS on OCTOBER 7, 2022 in Notice 2022-53. The IRS waived penalties for beneficiaries who "failed" to take 2021 and 2022 RMDs during the time of unclear guidance. Final regulations were to be forthcoming and would apply (at earliest) to the 2023 distribution year.

On JULY 14, 2023, an advanced version of IRS Notice 2023-54 was issued. It indicates that heirs subject to the 10-year rule are not required to take an RMD in 2023, 2022 or 2021. In the release, the IRS said they expect to release final guidance in 2024.

The Testamentary Charitable Remainder Unitrust - The Give It Twice Trust

Those who took unnecessary IRA RMDs in 2021, 2022 and 2023, cannot reverse those transactions. With the loss of the Stretch Distribution option for many IRA beneficiaries and the lack of clarity around future guidelines, if you are a charitably minded IRA owner, you may want to relook at how to distribute any remainder in your IRA.

When you revisit your estate plan, you may want to ask your advisor about funding a testamentary charitable remainder unitrust with your IRA balance. This plan can provide payments to your heirs, spread out the taxes on their inheritance and provide a future gift to United Way or other charity close to your heart. This is also called "give it twice trust".

Learn more about testamentary charitable remainder unitrusts here.

4. REQUIRED MINIMUM DISTRIBUTION AGE

2023 UPDATE (SECURE ACT 2.0) - Starting in 2023, the age for required minimum distributions (RMDs) increased from 72 to 73. The RMD age will increase again in 2033 to age 75. Individuals who are currently taking RMDs will continue to take a distribution each year based on their age.

5. CHARITABLE BEQUESTS

You may be looking for a way to make a significant gift to help further our mission. A bequest is a gift made through your will or trust. It is one of the most popular and flexible ways that you can support United Way of Santa Barbara County while not impacting your available cash today.

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6. DONOR ADVISED FUNDS

If you have a Donor Advised Fund (DAF) and wish to help United Way this year, you can make a gift from your DAF to support our work without affecting your personal financial security.

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7. ALWAYS UNITED E-NEWS SIGN UP

Always United E-news provides opportunities for donors who are at or near retirement and wish to continue their relationship with United Way. We feature estate planning information and also include news from Washington, Savvy Living tips, volunteer opportunities and other timely articles. Stay up to date on news impacting your retirement. Sign up for Always United E-news today!

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If you are interested in learning more about any of these ideas, please contact us. Please also let us know how we can help you during this time.