Tax-Smart IRA Planning for Financial Advisors: Strategies for Gifting and Legacy Goals

For many clients nearing or in retirement, their IRA represents one of the largest and most tax-sensitive assets they own. As they begin thinking about required minimum distributions(RMDs), healthcare costs, charitable giving, and their legacy, financial advisors play a critical role in helping them navigate strategic, tax‑efficient options.
Financial advisors can help clients balance two important questions:

• How do I care for myself and my future?
• How can I support the causes and people I love?

With thoughtful planning, IRA assets can support both lifetime income needs and generosity goals, often enabling clients to give more than they ever thought possible.

Starting at age 73, clients must begin taking RMDs annually. These withdrawals are taxable and increase a client’s adjusted gross income (AGI), potentially leading to:

• Higher income tax liability.
• Higher Medicare premiums.
• More Social Security benefits subject to tax.

As a result, managing AGI is one of the most important levers in tax planning. Even small reductions in AGI can meaningfully improve a client’s financial picture.

A QCD allows individuals 70 ½ and older to give up to $111,000 annually (for tax year 2026, adjusted for inflation) directly from their IRA to a qualified charity, bypassing income tax and satisfying any RMD requirement they may have. Remember: QCD eligibility begins at age 70 ½, even though RMDs don’t begin until age 73.

A great example comes from Thrivent financial advisor Jim Johnson, who introduced the idea of QCDs to his clients, Steve and Bev, after a health scare. They established a non-advised fund at Thrivent Charitable, avoided recognizing taxable income from their IRA distribution, and pre-selected the charities they wished to support—achieving simplicity, tax efficiency, and long-term generosity. Read more of their story here.

Clients may also consider:

• A once-in-a-lifetime charitable gift annuity (CGA) funded with IRA assets.
• A once-in-a-lifetime charitable remainder trust (CRT) funded with IRA assets.

These tools can help reduce taxable income and create more predictable financial outcomes.

What about clients who are hoping to support the causes they cherish and the people they love upon passing? IRA assets are among the most tax‑burdensome assets to leave to heirs due to the 10‑year withdrawal rule, which may force beneficiaries into higher tax brackets. Many clients appreciate alternatives allowing more to go to both their heirs and charity.

After death, IRA assets can fund a testamentary charitable remainder unitrust, providing an income stream to heirs while supporting charity at the end of the trust.

Life insurance wealth replacement can be an effective, tax-beneficial way to benefit heirs in lieu of an asset redirected to charity. Clients may take strategic IRA withdrawals and repurpose them into life insurance to benefit heirs, while leaving the IRA itself to charity. This can help replace the value heirs might otherwise lose to income taxes.

With different options for your clients to remain tax-efficient, you can guide your clients by assessing age and eligibility thresholds, charitable priorities, AGI, and long-term legacy intentions. This can help you and your clients identify which combination of IRA tools will maximize both tax efficiency and charitable impact.

Life events often create natural moments for financial advisors to reach out to clients:

• Age 59 ½: IRA withdrawals become penalty-free.
• Retirement: Lower-income years can be ideal for conversions and gifting.
• Age 70 ½: QCD eligibility begins.
• Age 73: RMDs go into effect and can potentially increase AGI and tax complexity.
• Death of a spouse: Introduces new tax brackets, AGI impacts, and beneficiary considerations.

1. Are there charities you support regularly?
2. Would lowering your taxable income this year be helpful?
3. How important is it to leave assets to heirs versus charity?
4. Have you thought about how your IRA fits into your legacy plan?

Effective IRA planning can help clients reduce taxes and support the causes they cherish. Your guidance ensures they understand their options and can make decisions aligning with their financial needs and values. Partnering with Thrivent Charitable gives you added tools and expertise to help clients use their IRA assets wisely and leave a meaningful legacy. Contact our team of charitable experts to explore unique solutions for your clients.