Retirement Account Assets
Current Outright Gifts
In order to make a current outright charitable gift today using Retirement Plan Assets and without incurring penalties for early withdrawals, individuals must be over age 59 ½; and would first have to take a distribution from their IRA or Retirement Plan Account; pay taxes due on the withdrawn amount; and use the proceeds to fund their gift by cash or check. So although donors would pay income taxes at their marginal tax rate when they make the gift, those who itemize their deductions could claim a full amount of the gift as a charitable income tax deduction in the year the gift was made, thus rendering the transaction a “wash” with regard to its overall tax consequences.
Although the above scenario is the norm for most donors, the 2008 Emergency Economic Stabilization Act has created an exception for the 2008 and 2009 tax years that temporarily allows ONLY those donors who are at least 70 ½ and owners of either a traditional or Roth IRA the opportunity to distribute directly to a public charity up to $100,000 per year as a current outright gift with the distribution being excluded from taxable income but still counting towards their mandatory annual withdrawal amount or minimal required distribution. It should be noted that in addition to the donor’s age stipulation, there are a number of other eligibility criteria that must be met in order for individuals to take advantage of this IRA Rollover provision. For example the legislation applies only to traditional and Roth IRAs and excludes all other Retirement Accounts such as pensions; 401(k) and 403(b) plans; and Simple IRAs. Moreover, unless Congress passes additional legislation to extend the provision, this current gift opportunity will expire December 31, 2009. However, for at least the next two years, individuals who are required to take unneeded IRA withdrawals and those who have experienced limitations on tax benefits in the past, may find this IRA Rollover opportunity of interest.
Deferred Gifts
A Retirement Plan Account can make one of the simplest and possibly most tax efficient deferred gifts one can give to charity. Retirement assets are not "tax friendly" since most individuals have contributed to retirement plans on a tax deferred basis, meaning taxes have been postponed until retirement. At retirement when distributions are taken both federal and state income taxes are due. If an individual also finds themselves to be in a high estate and gift tax bracket, heirs could potentially receive pennies on the dollar when the retirement assets are inherited. By naming the charity as beneficiary no taxes would be due on this account.
To make a future gift of a retirement Plan Account simply call the plan administrator, bank or brokerage company to request a Change of Beneficiary Form. A Charity can be named as primary beneficiary, contingent beneficiary, partial beneficiary or residual beneficiary of the account balance. Please contact one of the staff members with questions surrounding gifts of Retirement Plan Assets.
