It’s a Good Time for Charity

Until recently, the provision allowing IRA owners over age 70 ½ to transfer up to $100,000 of their IRA directly to charity had been eliminated. Having used this unique provision for my clients in the past, I was pleased to see that the provision was retroactively extended through year end 2009 as part of the recently-passed “TARP” legislation.

For those unfamiliar with this planning technique, here are some highlights.

• The provision applies to investors age 70 ½ or older who are required to take distributions from qualified retirement plan assets (i.e. IRAs, IRA rollovers from qualified company plans).
• Qualifying gifts must be made by 12/31/2008 (or 12/31/2009 for '09)
• Any direct transfer to a charity from an IRA will satisfy the required minimum distribution for the year (with a $100,000 limitation, $200,000 per married couple).
• If made directly to the charity, the distribution does not have to be included as taxable income. Therefore, taxes are lower than if you took the required distribution and subsequently donated the funds. In some cases, the reduction in taxable income may move you to a lower tax bracket or may preserve tax deductions or other tax benefits tied to Adjusted Gross Income levels.
• Unlike other charitable contributions, you DO NOT receive a charitable contribution deduction.

In these difficult times it's encouraging to see that our government didn't forget the many charitable organizations that depend on the generosity of our nation's retirees. Even for those who give substantially less than the $100,000 limitation (i.e. regular giving to religious organizations), this is a great strategy benefiting investors and charities alike.