Pledge to Make a QCD

When the qualified charitable distribution (QCD) from Individual Retirement Accounts (IRA) was first introduced in 2006, the timing for colleges and universities that push for 50th reunion gifts could not have been better. The new outright gift was available to donors who were age 70 ½ or older, which cleanly aligned with the age of many 50th reunion alumni. In 2006, a donor who was age 70 ½ or older was also faced with making a taxable required minimum distribution (RMD) from their IRA. The QCD outright gift provided relief by allowing a tax-free withdrawal. While there was no charitable deduction, donors benefitted by avoiding ordinary income tax on the portion of their RMD fulfilled by their QCD and receiving reunion credit for their gift.

Over time, the age at which a donor could make a QCD gift diverged from the age at which they must begin taking withdrawals from their IRA. In 2025, a donor can make a QCD at age 70 ½ or older, but they are not required to take an RMD until age 73. Colleges and universities that had become comfortable with marketing the multiple benefits of QCD gifts to their 50th Reunion alumni found themselves with a challenge. Would donors still be interested in this gift type if they couldn’t enjoy the benefit of applying the tax-free withdrawal towards an RMD they did not yet have?

From the point of view of many donors’ accountants, no QCD gift should be made until the donor has an RMD. Yet the IRA is often one of the largest assets a donor possesses, second only to the equity in their primary residence, so it is a natural source of what is often viewed as a donor’s capstone gift to their alma mater.

For some of our clients, the path forward is to market paying off reunion pledges with a QCD from the donor’s IRA once they turn age 73 and can use it to offset their RMD. This type of pledge is in line with other reunion pledge structures, which often allow five years to pay off a reunion commitment.

A reunion pledge also works with a QCD used to fund a charitable gift annuity (CGA), an option that became available starting in 2023. While there are strict rules prohibiting donors from paying a pledge with a gift to establish a charitable trust, donors can pay a pledge with a gift to establish a CGA, including a QCD CGA.

“We’ve heard frustration about this from alumnae approaching their 50th reunion,” said Sam Samuels, Director of Gift Planning at Smith College.  “They weren’t in a strong financial position to make a stretch gift from their IRA until a couple of years after that milestone reunion was over. So we started proposing to these donors to pledge it now to get the credit, then pay off the pledge when they’re of age for an RMD. Donors appreciate the flexibility and have jumped at this chance.”

A reunion pledge paid off with an outright QCD needs no special drafting. It is just one of many assets that a donor could choose to give in fulfillment of the pledge. However, colleges and universities pursuing pledges by establishing a QCD CGA should have their counsel draft a pledge template for these gifts. Once in place, the template can be used for both one-life and two-life QCD CGAs.

Rather than holding back from marketing QCDs until their donors are age 73, or calibrating how to introduce to younger donors a pledge to establish a QCD CGA, colleges and universities are well-advised to market QCDs widely. The introduction of the pledge as a way to maximize the benefit of the gift at age 73 is better left to follow-up discussions once the donor has expressed interest in a QCD, be it outright or to fund a CGA.

“This has been a win-win for Smith,” Samuels said. “They get the credit when the class wants it, but  they make the gift when their accountant wants it.”