Charitable Giving in Retirement: QCDs, Donor-Advised Funds and Trusts

Why the vehicle matters

Charitable giving in retirement is usually discussed as a deduction question. For many retirees the more useful question is which number on the return a gift changes. A deduction reduces taxable income, and for most federal purposes only when the household itemizes. An exclusion keeps the money out of adjusted gross income altogether, and adjusted gross income is the figure that several other retirement costs are measured against.

That distinction is why the choice of vehicle can matter as much as the size of the gift. Three vehicles cover most of what retirees use, and each answers a different question. Which one is appropriate, if any, depends on the household's income, assets, and charitable intent, and is a question for the CPA and attorney alongside the financial plan.

Qualified charitable distributions

A qualified charitable distribution is a transfer made directly from an IRA to a qualifying charity by an owner who is 70½ or older. The amount is excluded from income rather than deducted, so it does not depend on itemizing, and it counts toward any required minimum distribution for the year. An annual limit applies per owner and is indexed for inflation.

Several conditions apply, and most mistakes come from them:

• The transfer must go from the IRA custodian to the charity. A check paid to the owner and then donated is a taxable distribution followed by a gift.
• Donor-advised funds, private foundations and supporting organizations are not eligible recipients.
• QCDs come from IRAs. Money in a 401(k) or similar employer plan generally has to be rolled to an IRA first, and SEP and SIMPLE IRAs qualify only when they are no longer receiving employer contributions.
• To reduce the taxable portion of a required distribution, the QCD generally needs to be made before the rest of the year's required amount has been withdrawn.
• The donor cannot receive a benefit in return, and the charity's written acknowledgment belongs with the tax records.

Because QCDs are available from 70½ while required distributions generally begin at 73 or 75, there is a period in which a QCD reduces the IRA balance that later distributions will be calculated from, before any distribution is required. SECURE 2.0 also added a one-time election to direct a QCD to certain split-interest arrangements, such as a charitable remainder trust or charitable gift annuity, subject to a lower limit.

Donor-advised funds

A donor-advised fund is an account held by a sponsoring charity. The donor contributes cash or securities, generally takes a charitable deduction in the year of the contribution if itemizing, and recommends grants to charities over later years. The contribution is irrevocable once made: the sponsoring organization has legal control of the money, and the donor's role is advisory.

Two features make donor-advised funds useful in retirement. The first is bunching: several years of intended giving made in one year can lift itemized deductions above the standard deduction in that year, with grants still spread out afterward. The second is funding with appreciated securities held for more than a year in a taxable account. Donating the securities rather than selling them generally avoids recognizing the gain, and the deduction is generally based on fair market value, subject to percentage-of-income limits.

Federal changes that took effect in 2026 altered how charitable deductions work for both itemizers and non-itemizers, and contributions to donor-advised funds are treated differently under some of them. Because a QCD is an exclusion rather than a deduction, those changes do not affect it in the same way, which is one more reason the vehicles are worth comparing year by year rather than by habit. How the current rules apply to a particular gift is a question for your CPA.

Charitable remainder trusts

A charitable remainder trust is an irrevocable trust that pays income to the donor, or to the donor and a spouse, for life or for a term of years, with what remains passing to one or more charities at the end.

A properly structured charitable remainder trust may sell certain appreciated assets without immediately recognizing taxable gain at the trust level. However, distributions to noncharitable beneficiaries may be taxable under specific income-ordering rules, and certain transactions may trigger additional taxes. These arrangements require individualized legal and tax analysis.

Under those ordering rules, payments to a beneficiary can consist of ordinary income, capital gains, other income, or a return of principal, depending on the trust's tax attributes in a given year. The donor generally also receives a partial charitable deduction based on the projected value of the remainder interest.

That makes it a tool for a specific combination: a highly appreciated asset, a wish for income from it, and genuine charitable intent for what remains. It is not a way to eliminate tax on the gain. The trust is drafted by an attorney, carries administration and tax filing costs, and cannot be undone once funded. The IRS has cautioned against arrangements that improperly characterize trust distributions or attempt to eliminate gain through abusive structures, which is a further reason these are set up with counsel rather than from a template.

How the three compare

A general comparison, not a recommendation. Which vehicle, if any, fits depends on the household's income, assets and charitable intent, and on individualized legal and tax analysis.

Where giving meets the income plan

The vehicle matters in retirement because adjusted gross income does more than set the tax bracket. It feeds the calculation of how much Social Security is taxable, and modified adjusted gross income sets Medicare premium surcharges two years later, as covered in retirement health care before and after Medicare.

A QCD lowers that figure directly. A deduction lowers taxable income but leaves adjusted gross income where it was. For a household near a Medicare premium threshold, or with required distributions already pushing income higher than needed, the same gift can have a different cost depending on which vehicle it goes through. How required distributions interact with withdrawal order is covered in RMDs and withdrawal order.

The vehicles can also be combined. A household might make QCDs for annual giving from the IRA while using a donor-advised fund in a year with unusually high income, such as the year of a business sale or a large Roth conversion.

The California layer

California generally follows federal rules for IRA distributions, and a QCD is commonly treated the same way on the California return. The Franchise Tax Board has not published specific guidance on every recent federal change to QCDs, so newer features, such as the one-time split-interest election, are worth confirming with your CPA for California purposes.

California computes itemized deductions under its own rules and does not automatically adopt federal changes, including the federal charitable deduction changes that took effect in 2026. A gift that produces a particular federal deduction may produce a different result on the California return.

How Avinci approaches it

Avinci Wealth Management is a Registered Investment Adviser registered in California, Arizona, Illinois, Texas, and Nevada, firm CRD #327780, headquartered at 23929 Valencia Blvd, Suite 404 in Santa Clarita, with additional offices in Beverly Hills and Woodland Hills. When providing investment advisory services, Avinci Wealth Management is subject to its fiduciary obligations under applicable investment adviser law.

For Calabasas households approaching retirement, Avinci works as a financial consultant across the decisions that tend to get handled separately: how the portfolio is invested, when and how withdrawals are taxed, and how insurance and estate documents fit the income plan. Calabasas clients usually meet at our Woodland Hills office on Ventura Boulevard. Tax returns stay with the client's CPA, and tax planning is modeled in coordination with them.

Under the Retirement Blueprint, charitable giving is modeled with the income plan rather than after it: which accounts gifts come from, how they interact with required distributions and Medicare premium thresholds, and how they fit the estate plan. Avinci's planning can include IRA legacy planning, donor-advised funds and charitable remainder trusts, coordinated with the client's CPA and attorney. Founder Lindahl Lucas is involved in overseeing the development of Retirement Blueprint planning.

Avinci receives advisory fees for investment advisory services. Separately, insurance and annuity products may be offered through our affiliated insurance agency, Lucas Insurance Services, which may receive commissions from issuing insurance companies. This compensation arrangement creates a conflict of interest and is disclosed in our Form ADV.