Help Your Clients Make the Gift of a Lifetime

Giving Retirement Assets to Charity, Tax Free

Because of new legislation extending the Charitable IRA, qualified American seniors can make the gift of a lifetime by transferring a portion of their individual retirement accounts (IRAs) to charity, free from federal tax. Through 2009, qualified IRA holders can transfer up to $100,000 per year without incurring income taxes today or estate and income taxes in the future. If married, each spouse can transfer up to $100,000 per year from his or her IRA. Your Community Foundation is pleased to help members of our community give in this new way.

The new legislation contains a series of charitable incentives, including qualified charitable distributions of IRAs. Americans age 70½ or older can make tax-free IRA contributions to certain public charities such as Field-of-Interest, Unrestricted or Designated funds at the Community Foundation. Gifts to Donor-Advised Funds, Supporting Organizations and private foundations do not qualify for preferential tax treatment.

Your clients may be interested in this charitable opportunity if they:

• Have excess retirement savings.
• Are subject to a 50 percent of income charitable deduction limitation.
• Take the standard deduction on their tax return.
• Accept minimum distributions from an IRA and have alternative sources of income.
• Have an adjusted gross income above $159,950 ($79,975 for married filed separately), making them subject to a phase-out of itemized deductions.
• Are planning to leave a charitable legacy through an estate plan.
• Have designated a favorite charity as beneficiary of retirement assets.
• Care about the community and want to know their gifts will make a difference.

Example: Mr. Smith, age 75, has accumulated approximately $2,000,000 in his IRA accounts. He has other sources of wealth and plans to leave a sizable estate to his heirs and charity. Under the new law, Mr. Smith can create a fund at the Community Foundation to address the causes he cares about most by transferring IRA funds tax free. Mr. Smith can transfer up to $100,000 in 2008 and another $100,000 in 2009. In addition, if Mr. Smith is married, his wife can also make similar gifts from her IRA accounts.

Individuals who may benefit most from the new law include two-thirds of Americans who do not itemize income tax deductions. The tax law gives eligible donors the equivalent of a tax deduction for charitable gifts that they transfer from their IRAs. The IRS estimates that 5.7 million higher-income taxpayers claim the standard income tax deduction and do not get any tax benefit from their charitable gifts.

Though the legislation has extended charitable possibilities for IRAs, it remains prudent for wealth advisors to analyze each client's unique situation to determine the best assets to give. If a client wishes to liquidate appreciated stock, mutual funds or real estate, capital gains may be avoided by contributing these assets to the Community Foundation. Appreciated assets are usually preferable over IRAs for passing on to heirs.

Charitable IRA transfers are just one way the Community Foundation can work with you to help your clients achieve their personal, financial and charitable goals. We are a single, trusted vehicle your clients can use to address the issues they care about most, while gaining maximum tax benefit under state and federal law.

We welcome the opportunity to discuss this new charitable giving opportunity with you. Please contact us to learn more.