| As part of the Emergency Economic Stabilization Act | | | | "skips" the 50% AGI charitable deduction limitation. |
| of 2008, Congress allowed an important window of | | | | Therefore, an IRA holder may donate up to $100,000 |
| opportunity to remain open-one that enables IRA | | | | per year in 2008 and 2009 from his or her IRA without |
| owners age 70 1/2 or older to directly transfer up to | | | | having to worry about the 50% AGI charitable |
| $100,000 tax-free to charity in both 2008 and 2009. | | | | deduction limitation. An IRA holder who has a large IRA |
| Because this provision applies to every individual IRA | | | | may use this method to reduce its size during his or |
| holder, a husband and wife who both meet the | | | | her lifetime leaving less exposed to income and estate |
| minimum age threshold could effectively move | | | | taxes at death. |
| $400,000 out of their taxable estate over the next | | | | - Did you wish to complete a gift to a charity for a |
| two tax years. | | | | particular purpose? Charitable-minded individuals may |
| Is Transferring Money from Your IRA to a Charity | | | | have in mind ambitious programs such as underwriting |
| Right for You? | | | | a research project or sponsoring a scholarship |
| The ability to transfer money tax-free from your IRA | | | | program at their alma mater, but had been hampered |
| to contribute to a charity can be an excellent way to | | | | from making any contributions by current tax laws |
| advance both your philanthropic and estate plans. | | | | such as the 50% AGI charitable contribution limitation |
| While you will not receive a charitable deduction for a | | | | for cash contributions discussed in the previous |
| transfer from your IRA to a charity, the amount of | | | | paragraph. The IRA charitable-distribution provision may |
| your transfer will never be included in your gross | | | | be an ideal strategy that would enable an IRA holder |
| income. | | | | who wishes to make a substantial donation in 2008 or |
| If you fit any of the following profiles, we encourage | | | | 2009 to fulfill these charitable goals in a |
| you to contact your financial and tax advisor before | | | | tax-advantageous manner. |
| year-end to help determine if this provision is | | | | - Do you live in a state with unfavorable tax rules for |
| appropriate for you. | | | | charitable deductions and RMDs? The ability to make |
| - Are you 70 1/2 and already receiving your required | | | | a tax-free transfer to charity from an IRA could be |
| minimum distributions (RMDs)? Any IRA holder who | | | | especially appealing to residents in states that impose |
| has reached the age of 70 1/2 is eligible to make the | | | | state income tax on IRA distributions and don't allow |
| tax-free transfer of funds from his or her IRA to a | | | | any offsetting charitable deductions. The 2006 Pension |
| public charity. Also at 70 1/2, the IRA holder starts to | | | | Act permits the IRA holder to make the charitable |
| receive the taxable required minimum distributions | | | | contribution directly to a qualified charity from his or her |
| (RMDs) from his or her IRA. Accordingly, at year-end, | | | | IRA and not have to treat the contribution as a taxable |
| many charitable-minded IRA holders with excess RMD | | | | IRA distribution, thereby avoiding any state or local tax |
| amounts would prefer to use these funds for | | | | imposed on IRA distributions. |
| charitable contributions. The 2006 Pension Act permits | | | | Additional Requirements |
| an IRA holder to distribute either a portion or all of his | | | | Any IRA holder who takes advantage of the tax-free |
| or her RMD tax-free directly from his or her IRA by | | | | IRA charitable distribution must send a letter to the |
| transferring any amount up to a total of $100,000 to a | | | | qualified charity informing the charity of the donation. |
| favorite qualified public charity. The IRA holder reduces | | | | Here are some important points to keep in mind: |
| his or her taxable income by the amount distributed | | | | - You must be 70 1/2 on or before the date of the |
| and the charity receives a contribution. | | | | charitable transfer. |
| - Do you have a large IRA that likely will be subject to | | | | - Contact us before making a donation to arrange for |
| estate taxes at death? IRA assets are subject to | | | | the proper transfer of funds from your IRA to the |
| estate taxes and estate beneficiaries may have to | | | | charitable organization. |
| pay income taxes on IRA assets they inherit. Using the | | | | - You may not write a check to the charity from |
| IRA charitable distribution provision permits an IRA | | | | another account into which you transferred your IRA |
| holder to reduce the size of his or her estate, thereby | | | | funds. Doing so would eliminate the tax-free treatment |
| reducing the total amount of taxes imposed. | | | | and would cause the amount distributed to be included |
| - Do you take the standard deduction when calculating | | | | in your taxable income. |
| your taxes or do you itemize? Many retirees take the | | | | - Donor advised funds and most private foundations |
| standard deduction when calculating their income-tax | | | | are prohibited from receiving IRA rollover gifts. |
| liability because they don't generate enough deductible | | | | - You cannot receive anything of value in return for |
| expenses or income to make itemizing worthwhile. As | | | | your donation. For example, you cannot get tickets to |
| a result, they could be losing out on the tax | | | | a charitable event for your donation. |
| advantages of deducting their charitable donations. An | | | | - The transfer must come from a traditional or a Roth |
| IRA holder who uses the tax-free IRA | | | | IRA. Transfers to a charity from other retirement plans, |
| charitable-distribution provision as a way to make | | | | such as a SEP or SIMPLE IRA, or from a 401(k) or |
| charitable contributions will be able to obtain the tax | | | | 403(b) plan will not qualify under this provision. It may |
| benefit of the contribution without having to itemize his | | | | be possible, however, to roll over funds from these |
| or her deductions. | | | | accounts into a traditional IRA or a Roth IRA and then |
| - Are you collecting Social Security? An IRA holder | | | | make an eligible transfer to charity. |
| who collects Social Security is also required to receive | | | | - A qualified charitable distribution is treated as coming |
| the RMD from his or her IRA at age 70 1/2. The | | | | first from deductible contributions and earnings. If you |
| amount of the RMD could increase income to a level | | | | have made non-deductible contributions to your IRA, |
| where a portion of your Social Security benefit is | | | | have your tax advisor determine how much of the |
| taxable. By using the IRA charitable distribution | | | | donation is considered tax-free under this provision. |
| provision, the IRA holder may reduce total income and | | | | After the IRA Charitable Distribution: Written |
| thereby reduce the taxes imposed on Social Security | | | | Documentation Requirement |
| benefits. | | | | Cash donations, regardless of whether the |
| - Are you interested in donating more than 50% of | | | | contributions are made from an IRA or another source, |
| your annual income in 2008 or 2009, or both years? | | | | must be backed up by "proper" records, such as a |
| Typically, a donor may only deduct a cash contribution | | | | check, bank copy of the check, electronic funds |
| to a charity up to 50% of his or her adjusted gross | | | | transfer record, credit card or credit union statement, |
| income (AGI) in any given year. Any excess charitable | | | | payroll stub or W-2 (in the case of a payroll deduction). |
| contribution deductions are carried over to the | | | | These must show the name of the charity, the |
| following five years. By using the tax-free IRA | | | | donation amount and the date paid or transaction |
| charitable-distribution provision to transfer money | | | | posting date. A written acknowledgment from the |
| directly from an IRA to a charity, the donor effectively | | | | charity showing that information also will suffice. |