If you’ve been a diligent saver throughout your career and have accumulated substantial assets for your retirement, you are to be congratulated! A job well done. As you prepare for retirement, you now need to think about how to manage those assets over what could be 30 or more years of retirement for both spouses. 

One aspect of retirement planning that is often overlooked is tax planning. Your retirement income will likely shift from primarily earned income to distributions from retirement accounts, such as 401(k)s or IRAs, where Required Minimum Distributions (RMDs) become mandatory after age 73. 

For example, if you’ve accumulated a $2 million IRA, RMDs could easily exceed $80,000 annually by age 75, depending on IRS life expectancy tables. This taxable income could push you from a lower tax bracket, for example, a 24% bracket, into a higher one, 32%, or even 37%, especially if combined with other income sources like Social Security, pension distributions, passive investment payments, or investment earnings. 

Such a big jump in your tax liability may trigger additional costs, like higher Medicare premiums, underscoring the need for proactive strategies to manage taxable income and preserve your wealth throughout your retirement years.

In our article today, we will look at various retirement-giving strategies that allow you to give back to causes and charities you care about and use these strategies to manage your tax liabilities, including Qualified Charitable Distributions (QCDs), Charitable Remainder Trusts (CRTs), and Charitable Lead Trusts (CLTs). 

As fiduciary financial advisors in Boston, MA, the Sherr Financial Associates (SFA) team uses these and other retirement planning strategies to help our clients develop sustainable, tax-efficient retirement plans. 

Understanding RMDs and the Impact of Gift Giving

Once you reach age 73, you are required to begin taking Required Minimum Distributions (RMDs) from traditional IRAs and 401(k)s, as mandated by the SECURE 2.0 Act in 2025.

Based on your account balance and IRS life expectancy tables, these withdrawals are taxed as ordinary income. As noted, substantial RMDs can elevate you into higher tax brackets or inflate your Medicare premiums. Yet, they also present an opportunity for strategic philanthropy—particularly if you’re charitably minded and don’t require all of your distributions for living expenses.

This is where Qualified Charitable Distributions (QCDs), Charitable Remainder Trusts (CRTs), and Charitable Lead Trusts (CLTs) come into play. Each offers a unique approach to managing RMDs, lowering taxable income, and building a lasting legacy with organizations you care about. 

Qualified Charitable Distributions (QCDs): A Direct Path to Satisfying RMDs

Qualified Charitable Distributions allow you to transfer up to $105,000 annually (2025 limit, indexed for inflation) from an IRA directly to a qualified charity if you are 70½ or older. 

Unlike normal withdrawals, QCDs aren’t taxable income—they’re excluded from your Adjusted Gross Income (AGI). This makes them a standout option for satisfying RMD requirements without inflating your tax bill.

For example, say your RMD is $50,000. You could withdraw it, pay taxes, and then donate—or use a QCD to send $50,000 directly to a charity. The latter lowers your AGI, potentially preserving deductions, reducing Medicare surcharges, or avoiding higher tax brackets. 

The catch? QCDs must go directly from your IRA custodian to the charity (no personal accounts), and they’re capped at $105,000 per person, even if your RMD exceeds that. Still, for many, it’s a clean, immediate way to align RMDs with their gift-giving strategy.

SFA Tip: If your dual goals of tax efficiency and community impact involve supporting local causes like education or healthcare without tax consequences, a QCD may be a strategy you should consider discussing with your Boston financial advisor. 

Charitable Remainder Trusts: Income Now, Charity Later

Charitable Remainder Trusts (CRTs) take a different tack. You fund a CRT with assets—cash, stocks, or other appreciated assets—and it pays you (or a beneficiary) income for a term (up to 20 years) or your lifetimes (both spouses). After that, the remainder goes to a charity that you choose. CRTs don’t directly satisfy RMDs like QCDs but can complement them by reducing taxable assets over time.

Here’s how it works: Transfer appreciated assets (e.g., stock worth $200,000 with a $50,000 basis) into a CRT. You avoid capital gains tax on the sale within the trust, and you get a partial charitable deduction based on the remainder’s projected value—say, 10-30% of the contribution, depending on IRS actuarial tables. 

The trust then pays you an annual fixed percentage (at least 5%). If the withdrawal is set up with IRA funds post-RMD, it is taxable, but the tax deduction offsets some of that.

• The pros? Income for life, a tax break upfront, and a charitable legacy. 
• The cons? It’s irrevocable—you can’t reclaim the assets—and setting it up requires legal and administrative costs, which the charitable beneficiary may pay. 

SFA Tip: CRTs work well if you want increased income in retirement while reducing your taxable estate. To optimize a CRT, consider using QCDs for maximum effect.

Charitable Lead Trusts: Charity First, Family Later

Charitable Lead Trusts (CLTs) flip the script. You fund a CLT, which pays a charity an income stream for a set period—say, 10 years. Afterward, the remaining assets pass to your heirs (or back to you). Like CRTs, CLTs don’t directly meet RMDs, but they’re a powerful estate planning tool if you have substantial assets in IRAs or 401(k)s that will be impacted by RMDs. 

Consider this scenario: you withdraw $500,000 from your IRA to establish a Charitable Lead Trust (CLT). The trust then distributes $25,000 annually to a charity of your choosing for a decade. After 10 years, your children inherit the remaining balance—which could exceed the initial $500,000 if the trust’s investments perform well over that period. 

While you’ll owe taxes on the $500,000 RMD in the year of withdrawal, you’ll also receive an immediate charitable deduction based on the present value of the charity’s payments, offsetting some of the tax impacts. Plus, if estate taxes are a concern, the CLT reduces your taxable estate by removing those charitable payments.

Benefits include immediate charitable impact and estate tax relief—key for high-net-worth families. Downsides? Complexity, costs, and the risk that trust growth underperforms, leaving a smaller asset amount for heirs. 

SFA Tip: If you have maxed out QCDs for the year and want to blend philanthropy with generational wealth transfer, consider using CLTs.

Tax Break Comparisons 

Here’s a comparison of the tax advantages of Charitable Remainder Trusts (CRTs), Charitable Lead Trusts (CLTs), and Qualified Charitable Distributions (QCDs) in 2025:

• CRTs: When you fund a Charitable Remainder Trust with an appreciated asset in 2025, you avoid immediate capital gains tax on the asset’s sale within the trust. You also receive an upfront charitable deduction based on the present value of the eventual charitable remainder, plus a steady income stream that’s partially tax-favored (depending on the trust’s earnings), reducing taxable income over time.
• CLTs: In 2025, funding a Charitable Lead Trust with an IRA withdrawal or other assets triggers an immediate charitable deduction based on the present value of the charity’s fixed payments over the trust term. While the initial withdrawal (e.g., from an RMD) is taxable, the deduction mitigates the hit, and the assets passing to heirs at the end can reduce your taxable estate, offering future estate tax relief.
• QCDs: Based on Qualified Charitable Distributions in 2025, you can transfer up to $105,000 (adjusted for inflation) directly from your IRA to a charity, excluding that amount from your taxable income entirely. This bypasses the tax hit of an RMD, potentially keeping you in a lower tax bracket and lowering Medicare premiums without needing to itemize deductions.

Why Consider Sherr Financial Associates (SFA)? 

At Sherr Financial Associates (SFA), we create retirement planning strategies that seamlessly integrate charitable giving with tax mitigation for high-net-worth individuals. 

Whether you’re considering the income-generating potential of a Charitable Remainder Trust (CRT), the estate-reduction benefits of a Charitable Lead Trust (CLT), or the straightforward tax relief of Qualified Charitable Distributions (QCDs), our experienced team is ready to help you. 

Let SFA help you build a legacy that endures—for your family, causes you care about, and future generations. 

Ready to discuss your retirement-giving strategies? Connect with us today.

Sherr Financial Associates does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation.