THE IRA Charitable ROLLOVER IS HERE TO STAY

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Congress and President Obama have now officially approved tax legislation that will permanently extend the IRA Charitable Rollover.

What is an IRA Charitable Rollover?

The IRA Charitable Rollover, or qualified charitable distribution (QCD), is a special provision allowing certain donors to exclude from taxable income – and count toward their required minimum distribution – certain transfers of Individual Retirement Account (IRA) assets that are made directly to public charities.

The provision was first enacted for tax years 2006 and 2007 and has been extended periodically.

Since 2006, many donors age 70 1/2 or older have used this popular option to support the area of their choice with tax-wise gifts ranging from $100 to $100,000.

How does this help me?

A IRA Charitable Rollover makes it easier to use IRA assets, during lifetime, to make charitable gifts.

What will the rules be for the IRA Charitable Rollover?

A gift that qualifies, technically termed a “qualified charitable distribution,” must be:

  • Made by a donor age 70 1/2 or older on the day of the gift.
  • The donor transfers up to $100,000 directly from the donor’s IRA to one or more qualified charities. This opportunity applies only to IRAs and not to other types of retirement plans.
  • Transferred from a traditional or Roth IRA directly to a permissible public charity.
  • The donor pays no income tax on the gift. The transfer generates neither taxable income nor a tax deduction, so donors benefit even if they do not itemize their deductions.
  • The gift can satisfy all or part of the required minimum distribution for the year.
  • The gift may not be used to fund a gift annuity, charitable remainder trust, donor advised fund or private foundation.
  • The donor does not receive any goods or services in return for the rollover gift in order to qualify for tax-free treatment.

If a donor made a gift of up to $100,000 directly from an IRA in 2015, the gift will qualify under the new law. The new legislation does not have an expiration date. Donors can make gifts in 2015 and beyond.

QUESTIONS AND ANSWERS:

In January 2015, I made a retroactive 2014 charitable rollover gift that counted for my 2014 taxes. Can I still make another rollover gift during calendar year 2015?

Yes. This tax provision would retroactively reinstate the IRA Charitable Rollover provision originally enacted into law in 2006 for all of 2015 and remove any expiration date on the provision, thereby permanently extending the Rollover into the future. The legislation does not provide any expansion of the IRA Rollover provision.

Is there a limit on the amount that can be given?

Yes, there is a limit. An individual taxpayer's total IRA Charitable Rollover gifts cannot exceed $100,000 per tax year. If both husband and wife have substantial IRA accounts, then up to $200,000 per year may qualify for IRA rollovers.

What about the required minimum distribution?

If you have not already taken your required minimum distribution in a given year, a qualifying rollover gift can count toward satisfying this requirement.

Is an income tax deduction also available?

No. The gift would be excluded from income, so providing a deduction in addition to that exclusion would create an inappropriate double tax benefit.

Why are Roth IRAs included? Aren't withdrawals from a Roth IRA tax-free?

Withdrawals from a Roth IRA may be tax-free only if the account has been open for longer than five years or if certain other conditions apply. Otherwise, withdrawals are taxed as if they came from a traditional IRA. Therefore, certain Roth IRAs could benefit from a IRA Charitable Rollover.

Can other retirement plans, such as 401(k) and 403(b) accounts, be used?

No. However, it may be possible to make a tax-free transfer from such other accounts to an IRA, from which a charitable rollover can then be made.

Can a gift be made to any charity?

No. Excluded are:

  • Donor advised funds
  • Supporting organizations
  • Private foundations

Who can benefit from using the IRA Charitable Rollover to make a gift?

• Persons with significant assets in an IRA

• Persons making gifts that are large, relative to their income. (Because a charitable rollover is not included in taxable income, it does not count against the usual percentage limitations on using charitable deductions.)

• Persons having so few deductions that they choose not to itemize

Can a rollover gift be used to fund a charitable remainder trust or charitable gift annuity?

No. The donor can receive no benefits in return for the gift. This includes life income plan payments.

Can a rollover gift be used to maintain or improve a donor's standings?

No. While a IRA Charitable Rollover gift can be made to Athletics, the donor is not permitted to receive any priorities or other privileges in exchange for the gift. Otherwise, the gift will not be a qualified IRA Charitable Rollover.

Are there any benefits that a donor can receive?

The only permissible benefits from a IRA Charitable Rollover gift are those that would not reduce the tax deduction for which the donor would have otherwise qualified. However in some cases, a IRA Charitable Rollover gift is allowed to count toward naming opportunities.

What if a withdrawal does not meet the requirements of a IRA Charitable Rollover?

It simply will be included in taxable income as other IRA withdrawals currently are.

Is the IRA Charitable Rollover right for everyone?

While this is a great option, other types of gifts may provide donors with more tax benefits. As with any gift planning question, donors should consult their tax professionals for specific advice.

Can I still make a gift with an IRA beneficiary designation?

Absolutely! Whether or not you choose to make a IRA Charitale Rollover gift, you can still designate the WiseHeart Foundation, Inc. as a beneficiary to receive IRA assets after your lifetime. The lifetime IRA Charitable Rollover is simply another option for donors who would like to see their philanthropy at work now.

If I made a IRA Charitable Rollover gift in other tax years, can I do this again for the 2015?

Yes. Even if you and your spouse both made the maximum $100,000 IRA Charitable Rollover gift to a qualifying charity during one or more previous years, you can still take advantage of this legislation again for the 2015 and beyond.

What about 2016 and beyond?

Congress and President Obama approved tax legislation that will permanently extend the IRA Charitable Rollover.

More questions?

If you have additional questions, please contact Dr. David C. Lewis at the WiseHeart Foundation. The office phone is (901) 410-3633, Ext. 101 or email dclewis@wiseheartfoundation.org

As in all cases, consult your own advisors who must assume final responsibility in advising you whether or not this gift is appropriate in your own unique circumstance.