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 Helpful Articles
from David Vollrath,
Union County Foundation Executive Director
The Foundation encourages you to work closely with your professional advisor(s)
as you develop your estate plan and consider your present and future charitable goals. |
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IRA Charitable Rollover
By David Vollrath, Executive Director Union County Foundation
IRA Charitable Rollovers continue to be a charitable giving strategy that can benefit many donors and are worthy
of consideration. As of this date both the House and Senate are very close to agreement on a “tax extenders” bill.
This legislation called The American Jobs and Closing Tax Loopholes Act of 2010 will continue to permit a 2010
rollover directly from an IRA to a qualified charity. This rollover provision was first created by the Pension
Protection Act of 2006. This means if you are age 70 1/2 or older you can make a direct transfer of up to $100,000
to the charity of your choice. The transfer can be from a regular or Roth IRA to a qualifying charity or relief
organization.
Why would you want to take advantage of the charitable rollover provision? There are numerous reasons.
- The charitable rollover qualifies as the donor’s RMD (required minimum distribution). By using the charitable
rollover to meet the RMD requirements the donor is also reducing their taxable income and simplifying their tax
return.
- The rollover is convenient in that the donor need only contact the IRA custodian to arrange for the IRA rollover.
- Some very generous donors may perhaps be already giving 50% of their adjusted gross income, which is the maximum
permissible level for cash gifts each year. With the rollover, additional gifts can be given directly from the
IRA. This method in effect allows the donor to give 100% or more of their AGI in a given year.
- For some individuals their IRA’s have grown so large over the years that they represent a disproportionate
share of the estate. In these cases some asset balancing may be desirable to minimize future income taxes. By executing
a yearly charitable rollover of up to $100,000 the estate’s assets come into better balance.
- Individuals drawing social security can be taxed based on certain earnings limits. Drawing an annual RMD (required
minimum distribution) adds to ones taxable income and can trigger social security taxes. By using the charitable
rollover a social security recipient could potentially avoid/minimize social security taxes.
- Withdrawing an amount from an IRA could cause an individual’s marginal tax rate to increase to the next rate
tier. This situation is avoided by using the charitable rollover.
- Many tax payers do not itemize their deductions; therefore a charitable deduction is of no tax value. In this
case the increased income resulting from the IRA’s RMD adds to the individuals taxable income and is not offset
by any charitable deduction. Therefore it is preferable for all donors taking the standard deduction to make their
charitable gifts directly to charity via the charitable rollover to avoid additional income taxes otherwise payable.
The Union County Foundation encourages you to work with your professional financial advisors as you consider
your charitable goals and estate planning. The Foundation is equipped to help you achieve these goals by providing:
planned giving and estate planning resource information, charitable gift annuities/life income plans, and a broad
array of charitable choices. Please call us at 937-642-9618, email info@unioncountyfoundation.org,
or stop by our Marysville office at 126 N. Main St. We are committed to helping you…. “preserve your footprint
in time.”
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