"IS GIVING IRA ASSETS TO CHARITY STILL OK?"

 

"For the past few years, people at least 70½ years old have been allowed to donate as much as $100,000 a year from their individual retirement accounts to charity, count it as their required annual IRA distribution—and avoid paying tax on that amount. This special "qualified charitable distribution" provision ran out at the end of 2009."

There is still a lot of uncertainty in the tax law, from estate planning to retirement planning. Though the State of the Estate Tax continues to grab financial headlines, especially each time a multi-billionaire dies during this tax-free year, there is another little-known aspect of uncertainty affecting charitable giving. For the past few years, older people (at least age 70-1/2) have been able to make tax-free distributions from their IRAs to qualified charities. In fact, the law allowed a senior to donate as much as $100,000 a year from their IRA to charity, and count it as their required annual IRA distribution, and avoid paying tax.

This special “qualified charitable distribution” provision ran out at the end of 2009. While everyone seemed to think it would be extended, lawmakers left Washington for their summer break without addressing the issue, so it’s still up-in-the-air.

What does this mean for you? If you are considering donating IRA withdrawals to charity, the best advice right now, according to The Wall Street Journal, is to “Sit tight.” You can still make donations right up until December 31^st. Wait and see what Congress does – or does not do. In the interim, three points to keep in mind:

· You cannot take an additional tax deduction for these donations;

· Some types of charities (such as donor-advised funds and private foundations) typically don’t qualify under this provision; and

· Your gift must go directly from the IRA to the charity. Don’t withdraw the money and put it into your bank account first.

There are many tax-savvy charitable giving strategies.  To learn more, visit the Charitable Planning Center on our website.  While you’re at it, go ahead and subscribe to our monthly estate planning e-newsletter to stay on top of these issues every month.

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