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Planned Giving:
Upon first hearing the term “Planned Giving”, many immediately believe that the term applies only to the very wealthy. The truth , however, is that planned giving makes sense for even those of modest means who desire to make a difference by promoting their favorite charity’s mission.
In the next several newsletters, I shall discuss the various ways that planned giving can benefit a donor as well as the APDA and the technical requirements for properly donating specific types of assets.
Most people think of a donation as an immediate gift with a concurrent loss of personal value. While it is true that direct, immediate giving is certainly the most common form of donation; there are many ways to make a gift today that will derive tax benefit to the donor, and yet defer actual parting with value to a date in the future of the donor’s choice.
Charitable IRA Rollover!
In the past, many people have sought to make a gift to the APDA out of qualified retirement plan benefits but have shied away from doing so because income tax laws gave no tax benefit incentive to so gifting. Upon withdrawal of the amount of the gift from the IRA, the gift was income taxed.
As a result of recent changes in tax laws, if you are age 70 1/2, or older, you may now make cash gifts from a traditional IRA or Roth IRA to the APDA without incurring income tax on the amount withdrawn.
Under the Pension Protection Act of 2006 (signed into law on August 17, 2006) for the years 2006 and 2007 a persons 70 ˝ and older can exclude up to $100,000 from gross income for gifts made directly to a qualified charity.
As is always the case with tax laws, there are a few restrictions:
The IRA plan participant/donor must have attained the age of 70 ˝ at the time of the gift;
The qualified distributions cannot exceed $100,000in the aggregate in any taxable year;
The distribution must be made by December 31 of either of the taxable years in which the gift is allowed under the law;
While the distribution is not taxable, no deduction is available;
This provision applies only to present outright gifts and not to charitable gift annuities, charitable remainder trust or other split gift arrangements;
Such a charitable contribution can count against the required minimum distribution obligation of the donor;
Such a contribution is not subject to the deductibility ceiling or the 2% rule that requires itemized deductions be reduced by 2% of adjusted gross income in excess of $150,500 for tax year 2006;
Gifts from retirement accounts other than IRAs are not eligible for this favorable tax treatment;
Donors who do not itemize their federal income tax returns may make qualified IRA gifts and exclude such gifts from their reportable income;
State income tax laws may differ, so check with your tax advisor.
Who may best benefit from this new tax law?
Donors who are required to make required minimum distributions but do not need the additional income on which to live;
Donors who wish to donate in the aggregate more than the deductibility ceiling of 50% of Adjusted Gross Income;
Donors who are subject to the 2% rule that reduces itemized deductions;
Donors whose major asset is an IRA and wish to make a present gift without income tax penalty;
Donors who intend to leave a sizeable portion of a qualified retirement benefit to charity after death;
For those with taxable estates, this provision is a substantial added boon because the combination of estate and income tax often reduces the value of qualified retirement plans to beneficiaries by as much as 76%. By making a gift from an IRA instead of regular assets, the potential inheritance of intended beneficiaries increases.
This provision is of limited duration (effective for tax years 2006 and 2007), so if the idea appeals to you, don’t delay in consulting your tax advisor about making such a gift.
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MAIN OFFICE:
7777 Bonhomme
| Suite 1501 |
Clayton, Missouri 63105
(314) 863-7493
FAX (314) 863-7494
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ST.
CHARLES OFFICE:
4638 Old Farm House Rd. St.
Charles, Missouri 63304
(314) 863-7493
FAX (314) 863-7494 ST.
CLAIR OFFICE:
124 N. Main Street St.
Clair, Missouri 63077
(314) 863-7493
FAX (314) 863-7494 |
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