Every year, many Americans are required by law to withdraw money they have no immediate need for. This leaves a great opportunity for nonprofits to increase their revenue by tapping into money already on the table.
In this article, we’ll explain what Qualified Charitable Distributions are, how they benefit your organization, and how to attract more of them. We’ll even share a free QCD Appeal Letter Template for you to send to your donors and raise more money!
At a certain age, individuals are required to withdraw a set amount from their retirement account holdings each year, called Required Minimum Distributions (RMD). If the RMD is not met, the amount not withdrawn will be taxed at 50%. However, some individuals do not need or want to withdraw the money. In addition, the money withdrawn is considered taxable income and, therefore, can increase their tax burden.
What Is a Qualified Charitable Distribution?
Making a Qualified Charitable Distribution (QCD) from a retirement account, such as an Individual Retirement Account (IRA), can alleviate those burdens. The individual:
- Avoids the penalty for not meeting the minimum withdrawal amount
- Reduces their Adjusted Gross Income, therefore reducing their tax burden and potentially moving them to a lower tax bracket
- Makes a lasting impact on their favorite charitable organization
How to Attract More Qualified Charitable Distributions
At Carnegie Investment Counsel, we have seen a significant increase in individuals using Qualified Minimum Distributions to satisfy their Required Minimum Distributions. This is a largely untapped source of funds for small and mid-sized nonprofit organizations.
Here are three tips to successfully attract more QCDs to your organization.
1. Have an easy and clear gift acceptance procedure
Major donors do not want their time wasted. Ensure your gift acceptance procedure is easy for the donor to complete. All members of the development staff should be aware of the process and understand their responsibilities. A smooth and easy donation process will set you up for larger gifts in the future!
Including your nonprofit financial advisor in creating this process can ease this burden. If you don’t have a financial advisor yet, contact Carnegie Investment Counsel to learn how we can help your organization.
2. Create a stewardship plan for these types of donors
Instead of sending a QCD donor a standard thank you, consider creating a stewardship plan custom for this audience. Donors want to feel appreciated and included in the mission and know the impact their gift makes. It can be simple, but taking a small amount of time to handwrite a thank you, make a call twice a year, and send a few success stories will pay off immensely in the future.
By showing appreciation and engaging with major donors, you are strengthening the bond they have with your mission and increasing the likelihood of a future gift. And if nurtured and engaged with on a regular basis, that gift could continue to become larger year after year!
3. Make sure your donors know about this unique option
Many donors don’t know donating a QCD is even an option, let alone the tax benefits it has. Talk about it loud and often, so all your donors are aware of this great opportunity! Clearly communicate how easy it is and what next step the donor should take.
- Include it in your donor welcome series
- Talk about it at your next fundraising event by highlighting a story that was made possible because of a QCD
- Add it to your remit envelope and email signatures
- Send an appeal to a segmented group of donors
If it isn’t listed, donors may assume you don’t offer that option without even asking!
A great donor stewardship program recognizes that donors are more than just a number: They are a partner with you on your mission. Make the donor feel valued and appreciated, and they will want to support your mission again. They should be updated on how their gift is impacting your mission with specific examples, stories and statistics.
Start Attracting Qualified Charitable Distributions Today
Fall is an ideal time to begin educating donors on QCDs, as taxes and year end begin approaching. Starting early and mentioning it often is key. Donors need to be aware of all options to support the cause they love!
To help you, we created a QCD Appeal Template you can customize and send as an email or mailing. This communication tool is meant to be used as a starting point, with space for you to add your own stories and emotion. Be sure to apply your logo and branding elements to make it unique to your organization. We’ve included all the points you need to highlight QCD donations. But to secure the donation, you’ll want to remind the donor why they love supporting your organization. You can do this by including a success story and emotional verbiage.
We recommend taking some time to segment your donor list when choosing who to send this to. Choose repeat donors who may be at the age of RMDs and have a deep connection to your organization. This is the group you can educate and empower to make a lasting impact on your organization.
Talk with your financial advisor to ensure everything is in place to facilitate an easy transfer of funds. Contact Carnegie Investment Counsel to learn how we can help your organization!
Looking for a Financial Advisor for Your Nonprofit?
If you are currently looking for help with financial planning, contact us. We are happy to schedule an introductory meeting at your convenience.