Charitable Strategies to Help Your Clients
The Protecting Americans from Tax Hikes (PATH) Act of 2015 made permanent the Charitable IRA Rollover provision of the Pension Protection Act of 2006. A taxpayer age 70 ½ or older may “roll over,” or transfer, up to $100,000 annually from his or her individual retirement account (IRA) or Roth IRA for a qualified charitable distribution. The amount transferred will be excluded from income of the taxpayer for federal income tax purposes. The amount transferred does not generate a charitable income tax deduction, but it does count toward the taxpayer’s minimum required distribution. If married, each spouse can transfer up to $100,000 from his or her IRA annually.
The permanence of the Charitable IRA Rollover is nicely timed with the first Baby Boomers turning 70 years old this year. The estimated 76 million Baby Boomers are the first generation to spend nearly their entire working life contributing to IRAs, or other income tax deferred plans, and likely hold a substantial portion of their net worth in an IRA.
Bill Dale, attorney at Dale & Eke, says he was a huge fan of the IRA charitable rollover even before it was made permanent.
“I use the IRA Charitable Rollover to make a lot of annual gifts and ask the administrator to send the checks directly to my chosen charities. It is efficient from a tax standpoint and I’ve used it for several years.”
Through strategic use of the Charitable IRA rollover, your client could:
- Avoid a higher tax bracket that might otherwise result from taking a mandatory distribution requirement into income
- Complete a pledge made to a faith community, alma mater or other capital campaign
- Advance a bequest already planned for a favorite nonprofit (and receive a tax benefit during life if no estate tax benefit is anticipated)
- Make a significant lifetime gift and enjoy the impact
- Support favorite charities with annual gifts (just like attorney Bill Dale)
Here at CICF your client could make a significant lifetime gift using the Charitable IRA Rollover to start a:
- Donor Designated Endowment Fund to provide annual grants to one or more favorite charities in perpetuity. This is a great way for your client to “endow” his or her annual support for favorite organizations.
- Scholarship Fund to help make postsecondary training possible for deserving students. CICF has awarded more than $11 million in scholarships since 1997 and $1 million alone in 2015!
- Field of Interest Endowment Fund to invest in an issue important to your client while relying on CICF’s experienced staff to identify nonprofit grantees making the greatest impact in that area.
Your client can also support the unrestricted grant making endowments of The Indianapolis Foundation or the Legacy Fund of Hamilton County with an IRA rollover gift. These community endowment funds support the widest range of issues in Marion and Hamilton counties, and together have made nearly $118 million in grants since 1998.
Please note that IRA Charitable Rollovers cannot go to donor advised funds, supporting organizations or private non-operating foundations.
There are many specific rules regarding charitable rollovers and CICF’s charitable gift planning staff is happy to help. Please Tiffany Barnes, charitable gift planning advisor email at firstname.lastname@example.org.