Charitable Giving Incentive Nears End





MACF Tax-free rollovers from individual retirement accounts (IRAs)—allowing Americans age 70½ and older to transfer up to $100,000 from their IRAs to charity during their lifetimes—will end on December 31, 2009. The Charitable IRA has helped individuals give back to their community during their lifetime and see the good works their gifts make possible.

“The Charitable IRA option is a good one for people interested in putting their retirement assets to work on the particular causes they care about, rather than letting those assets go to taxes.” said Jan McGuire, Midland Area Community Foundation President and CEO.

Thanks to decades of deliberate saving, some of today’s retirees have more money in their IRAs than they need for daily living expenses and long-term care. Charitable individuals and couples have expressed an interest in giving the funds to charity, but income tax must be paid on all withdrawals, which reduces the value of the gift. Some are concerned about designating their children as IRA beneficiaries, since that may draw unintended tax consequences.

“For larger estates, a good portion of IRA wealth goes to estate taxes and income taxes of beneficiaries,” McGuire said. “Experts estimate heirs may receive less than 50% of IRA assets that pass through estates.”

The sun-setting federal law adds an important option: transferring IRA assets directly to charity. By going directly to a qualified public charity such as the Community Foundation, the money is not included in the IRA owner’s income and—most important—is not taxed, preserving the full amount for charitable purposes.

“Under normal circumstances, giving IRA assets to charity triggers a taxable withdrawal,” said McGuire. “We’re ready to help people take advantage of this opportunity to meet their philanthropic goals by giving a gift to causes that matter—and witness how their gifts benefit our community.”

During December, holders of traditional IRAs who are at least 70½ years old can make direct charitable transfers up to $100,000. Married couples can transfer up to $200,000 free from federal tax from separate accounts. The Community Foundation can help donors execute the transfers and choose from several charitable fund options for their gift. Donor Advised Funds do not qualify for tax-free IRA transfers.

“This really is a limited-time offer: the window is open now, but it will close at the end of 2009,” said McGuire. “For anyone who cares about giving back to our community, this is the opportunity of a lifetime to make the gift of a lifetime.”