As an attorney who has worked within the philanthropic community assisting both charities and individual donors, one vehicle of giving that is not often utilized in gift consideration is the Individual Retirement Account (IRA) rollover at the year’s end. With so many changes in tax policy since the 2017 Tax Cuts and Job Act, it might be of interest to you as a supporter of a 501(c)(3) charity such as Firewall Centers to review how an IRA can be mutually beneficial for both your 2019 legacy efforts and for Firewall.
An IRA owner who has reached the age of 70 ½ or older can make a direct transfer of up to $100,000 to an eligible charity, tax-free. This means that amounts directly transferred to the charity from an IRA are counted in determining whether the owner has met the IRA’s required minimum distribution (RMD), but will not be considered a taxable withdrawal. Nice, right? Some restrictions apply including the fact that distributions from employer-sponsored retirement plans, such as SIMPLE IRAs and simplified employee pension (SEP) plans, are not eligible.
If you are at age 70 ½ or older and are the owner of a Traditional IRA (or inherited Traditional IRA) and do not need all or part of your required minimum distribution, you can make tax-free IRA contributions directly to qualified public charities such as Firewall Centers.
Each age-eligible IRA owner can transfer up to $100,000 tax-free per tax year.
Your IRA gift must be completed on or before December 31 of the calendar year in which you choose to utilize the IRA Charitable Rollover gift vehicle for tax purposes. Generally, if sent by US mail, the postmark determines the date of a charitable gift.
The check should be made payable directly to Firewall Centers.
You can only make outright gifts. The IRA Charitable Rollover cannot be used to fund life-income gifts (such as charitable gift annuities or charitable remainder trusts).
You can count your gift towards your annual required minimum distribution.
Your distribution is not recognized as income on your federal income tax return and therefore not eligible for a federal income tax charitable deduction.
Under current federal tax laws, keeping your IRA distribution out of your adjusted gross income may save you taxes.
The transfer process is quick and requires minimal paperwork.
Employer-sponsored retirement plans, such as SEP IRAs, SIMPLE IRAs, 401(k)s, and 403(b)s are generally not eligible for the IRA Charitable Rollover.
While the IRS permits IRA Charitable Rollover gifts from Roth IRAs, using a Roth IRA eliminates many of the tax advantages of the charitable distribution. If you don’t have a traditional IRA, it may be better to withdraw funds directly from your Roth account, make a gift, and take a charitable deduction. Consult your financial or tax advisor for advice.
Most (but not all) states exclude IRA Charitable Rollover gifts from income for state and local tax purposes. The Holiday season allows us the opportunity to reflect on the blessings in our lives and our thoughts can turn to those less fortunate than ourselves. The IRA rollover can be an effective vehicle of legacy planning for those who take advantage of it.
Thank you, and I wish you and your families a safe and blessed Holiday season.
JoAnne Daudt has been a trust and estate planning attorney helping individuals and families plan for the future for over thirty years.
For questions about supporting Firewall Centers with an IRA Rollover or other appreciated assets, please contact us at 954-530-1871 or firstname.lastname@example.org