They also realize that if they do not use it, their heirs will pay taxes on the remaining funds when they die. Individuals who participated in retirement savings plans have been able to make estate gifts through a simple beneficiary designation when they die.
They've been unable, however, to give any qualified retirement plan to a charity while living and not pay the taxes - until now.
The new Pension Protection Act of 2006 is great news for philanthropists and charities, but one needs to know the specifics to be able to take advantage of the opportunity.
The new opportunity gives philanthropists a way to use their IRAs to make charitable gifts to their favorite public charities.
Currently those charities fall under Sec. 509(a) (1) and Sec. 170(b)(1)(A) of the tax code. The gifts must come out of a regular or Roth IRA to be used for the general purposes of the charity.
The new law allows individuals to make gifts up to $100,000 and applies to donors over 70 1/2. One nice thing about it being after 70 1/2 is that the gift transfer should qualify for the required minimum distribution (RMD) of the IRA. A donor should not withdraw the funds out of the IRA before making the gift to the charity, but should transfer the funds directly to the charity.
Unfortunately, PPA 2006 excludes planned giving options like charitable gift annuities, charitable remainder trust and pooled income funds. Unless the law is revised, the opportunity will end, December 31, 2007.
Arranging to make the gift is easy and the gift will not increase the donor's taxes for the year of the gift. With all changes regarding your finances, there should be some precaution.
An IRA gift can affect your financial picture, and we advise that you get all the facts on how to make the gift and the financial consequences. If you need more information and/or would like to discuss the new IRA giving opportunities, call Shad Engkilterra at 907-463-5713 or e-mail firstname.lastname@example.org.