Betty Winkler
By Betty Winkler
I received a big surprise in early July of this year. A former professor of mine who followed my careers and with whom I maintained contact for fifty years, left me a modest “Inherited IRA” as one of several beneficiaries. She passed on suddenly, at age eighty-nine. I am honored by this act of hers.
My first dilemma with Joann’s amazing gift: the money was in a traditional IRA in a financial firm that does not invest totally ethically, so I wanted it out. At first, I did not have access to any information, other than the firm’s name, and assumed it was not ethically invested. That was confirmed by the firm’s representative that first contacted me.
Next dilemma – it was a traditional IRA, which meant that if I removed any of it, federal tax would be owed, either upon withdrawal or with annual income tax. As a war tax resister of varying degrees, and especially now as the USturns into dictatorship, I could not do it. Simply could not.
Inherited IRAs have different rules than those owned and managed as one’s own IRA. Marriage or single status factors into several aspects of inherited IRA withdrawals. Being an inherited and traditional IRA, and my being single, it was not allowed to be rolled over into my own Roth IRA, which is in an ethical investment firm.
I know others may determine any investments in capitalist structure are unethical; that is not me. I look at selective investments as contributing to environmentally sound companies and contributing to communities while additionally investing in startups that otherwise would not have a chance to develop healthy, sustainable products. Also, I know tech companies are a large component of the investment firm I use, and that they supply digital infrastructure to myriad purposes, among them military. I do the best I can.
So, I couldn’t take it out and I couldn’t keep it in. I researched and quickly found QCD, Qualified Charitable Distribution. This is a direct contribution to a 501(c)(3) organization from the inherited IRA. I was lucky that I recently reached the required threshold of being 70 and one-half years old. Any younger and the QCD is not allowed to be used.
But I was the right age, I am lucky enough to be able to live without the inheritance, tax or no tax. (Not luck only, mostly simple living with a strong commitment to saving money.)
My next step was to see if I was reading the IRS publication correctly. I had already spoken with my financial institution which advised me to speak with an accountant. I didn’t have one, so I contacted friends, who made referrals. One of the two accountants was referred by Ruth Benn. The other referral, who spoke with me first, was from a friend who has a small arts business. Both accountants, one being a second opinion to the first, spent a few minutes with me on the phone, without charge. Both confirmed my understanding of the IRS rule – that I could make contributions without paying any tax and that these are a separate category from donations and therefore are not deductible on a 1040 IRS return.
QCDs are hidden within Publication 590-B (2024), regarding IRA Distributions (aka withdrawals); information is on page 13. The maximum annual exclusion for QCDs is $105,000. Any QCD in excess of the $105,000 exclusion limit is included in income as any other distribution. If you file a joint return, your spouse can also have a QCD. I think I read somewhere that there is also a lifetime maximum. [Editor’s Note: there is no lifetime limit on QCDs to charities. There is an annual limit of $108,000 for individuals, $216,000 for married couples for 2025.]
Before any beneficiary monies were released or known, I had to pay state taxes through a lawyer. I was told this was non-negotiable and it happened in a flurry; I am not sure why.
From first hearing of my being a beneficiary, without knowing initially if it was a Traditional or Roth IRA and not knowing about QCDs, I knew I would donate at least some of it. I drafted a short list of donor organizations. Once I had all the information, I expanded that list so that all the money would go to worthy organizations by way of QCDs.
The investment firm would have mailed the checks to the organizations directly without a cover letter. I wanted to include information about the person who means so much to me and who was the source of the money. The firm accommodated me. The checks, made out by the investment firm, were sent to me, and I then mailed them out to the organizations, with my cover letter and contact information. A couple of them received a follow-up email about my pleasant dilemma, the reason I wrote this piece.
[Editor’s Note: Qualified Charitable Distributions can be made to NWTRCC through our fiscal sponsor, Resources for Organizing and Social Change. (Their EIN is 01-0353747.) Ideally, the check would be mailed to NWTRCC, PO Box 5616, Milwaukee, WI 53205. Some investment companies will only mail checks directly to ROSC. If that is the case, please let us know. Otherwise, there is the possibility that ROSC might not notice it is earmarked for NWTRCC and may accept the donation for themselves.]