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Case Study: A Qualified Charitable Distribution in Practice

Most advisors know the basics of Qualified Charitable Distributions (or QCDs), but that isn’t the same as navigating a real client conversation. While it’s common for this topic to come up, it can sometimes feel unexpected, and you’ll need to apply it to real-life situations quickly. Sometimes, a practical example is what makes it really quick.

Here is a case study based on common scenarios we see at the community foundation, and how to turn it into a meaningful strategy.

Meet Your Client

Margaret is a 74-year-old widow and a longtime client of your practice who wants to meet about her charitable giving plans. Her email mentions that she’s recently started to take required minimum distributions from her IRA, and she’s surprised by how much her taxable income has increased. It’s more than she needs to support herself.

Before the meeting, you reviewed Margaret’s file and noted something important. Several years earlier, she had established a donor-advised fund at the community foundation that was central to her giving. This fund let Margaret support all kinds of organizations in a structured way, and she enjoyed the foundation’s events and education programs as a way to stay connected.

Introducing the QCD Question

When Margaret arrived, the meeting began with casual conversation, but she quickly got to the point. “I’ve been reading about something called a Qualified Charitable Distribution,” she said. “Since I’m giving to charity anyway, I want to know if doing a QCD in 2026 makes sense for me. And ideally, I’d like the gift to go through the community foundation where I already do all my giving.”

You explained that her instincts were right. A QCD allows individuals age 70½ or older to transfer funds directly from an IRA to a qualified charitable organization. Since this distribution is excluded from taxable income, it’s especially good for clients who are subject to required minimum distributions. In Margaret’s case, a QCD could satisfy some or all of the requirements and keep her adjusted gross income low.

That lower income can have ripple effects. You explained how QCDs may help manage Medicare premium thresholds, reduce the taxation of Social Security benefits, and improve overall tax efficiency. You also made sure to bring up that the annual QCD limit had increased in 2026, and it was now $111,000.

A Common Point of Confusion

Margaret was encouraged, but she had a follow-up question. “Since I already have a donor-advised fund at the community foundation, can I just send the QCD there?” she asked.

You were ready for this moment. It’s one of the most common misunderstandings surrounding QCDs. You explained that under current IRS rules, QCDs cannot be made to donor-advised funds, even when those funds are held at a community foundation.

You acknowledged that this restriction often feels counterintuitive. Donor-advised funds are irrevocably dedicated to charitable purposes, yet the IRS excludes them from QCD eligibility because the donor retains advisory privileges. While the rationale may be frustrating, the rule is clear, and compliance matters.

Explaining the Rules Without Losing the Client

Seeing Margaret’s puzzled expression, you broadened the explanation. QCDs are permitted only to certain types of charitable recipients. They can be made directly to operating public charities and, in limited cases, to certain split-interest arrangements such as charitable gift annuities or charitable remainder trusts, subject to strict requirements. Donor-advised funds are excluded, regardless of where they are housed.

Margaret expressed her disappointment. The donor-advised fund had given her flexibility and peace of mind. She liked being able to support multiple causes over time without feeling rushed. The good news is, while the donor-advised fund can’t receive the QCD, a community foundation can help her stick to her goals.

Exploring QCD-Eligible Fund Options

You explained that Margaret could direct her QCD to a different type of fund at the community foundation. A designated fund could support specific charities she already knew she wanted to help. A field-of-interest fund could focus on areas she cared about, such as education, healthcare, or the arts. An unrestricted fund could support the community’s most pressing needs as identified by the foundation.

These fund types differ from donor-advised funds in an important way. Once established, they are fully administered by the community foundation, without ongoing donor advisory privileges. That distinction makes them eligible recipients for QCDs while still aligning with Margaret’s charitable intent.

Knowing When to Bring in a Partner

Margaret paused. “I don’t want to rush this,” she said. “I want to be sure the fund really reflects what matters to me and that everything is done correctly.”

You agreed. This was the moment where collaboration mattered most. You explained that working directly with the community foundation would help ensure the fund structure complied with QCD rules and aligned with her goals. The foundation could provide guidance on fund options, draft the appropriate fund agreement, and offer insight into how the funds could be used most effectively.

You suggested a joint meeting. The community foundation’s knowledge of charitable structures and local needs would complement your role in managing the tax and legal considerations. Together, you could help ensure Margaret’s QCD was clean, compliant, and meaningful.

Margaret smiled. “That’s exactly what I want,” she said. “I don’t want this to be just about taxes.”

Turning Strategy Into Action

By the end of the meeting, the path forward was clear. You agreed to review the IRA custodian’s requirements for executing a QCD, and the community foundation can help with setting it up and tailoring it for Margaret. That includes letting her use her RMD to support her favorite causes and reducing her taxable income, all with structure.

As Margaret left, it was obvious that she felt reassured. She had clarity around the rules, a strategy that fit her financial situation, and trusted professionals working together on her behalf.

Why This Case Matters for Advisors

Margaret’s situation is not unique. Many clients entering or navigating retirement face similar questions about required minimum distributions, rising taxable income, and charitable intent. QCDs can be powerful tools, but only when implemented correctly. Just as important, clients want their giving to feel purposeful, not mechanical.

If you anticipate QCD or charitable giving conversations with your clients, Athens Area Community Foundation is here to help.