Giving IRAs to charities like Aspen Valley Hospital Foundation can be a win-win
Written by Deborah Breen, President & CEO Aspen Valley Hospital Foundation
As the end of the year rapidly approaches, I often am asked about the most effective and efficient ways to make a meaningful charitable gift. At Aspen Valley Hospital Foundation (AVHF) we have a knowledgeable estate planning attorney, Bill Gustoff, who is on site once a month and has a proven track record of helping people create estate plans that are right for them. I recently had an opportunity to talk with Bill about things to keep in mind with year-end giving. Here’s what he had to say.
Many people save for retirement using traditional individual retirement accounts (IRAs). These are the accounts that allow pre-tax dollars to be invested on a tax-free basis, with all of those pre-tax dollars and their growth being taxed at the marginal
rate of the individual who withdraws that money. This is great when you’re trying to
defer taxes while saving, but IRAs can also be a tax trap when they mature. While many retirees have sufficient income for their needs, at age 70 ½ they are required to make withdrawals, often resulting in a higher tax bill. Those who give money to charity offset their income to a large extent, but the result is not always a balanced one in which every dollar given to charity helps save that dollar from adverse income tax treatment. Fortunately, Congress passed the Pension Protection Act, which includes the “IRA Charitable Rollover” provision, allowing a tax-free transfer directly from certain taxpayers’ IRAs to qualified charities without income tax consequences.
REQUIREMENTS AND RESTRICTIONS INCLUDE:
• Donors must be at least 70 ½ years old at the time of the gift.
• Only traditional IRAs may be used.
• Donors may transfer up to $100,000 per tax year.
• Only public charities qualify — not private foundations, donor advised funds and supporting organizations.
• Distributions must be directly transferred to the public charity from the IRA by an IRA administrator.
• The donor cannot receive goods or services in exchange for the rollover.
The effect of a qualified IRA Charitable Rollover is that the money distributed from the IRA to the charity will not count as income for the donor, but it will count toward the donor’s annual required minimum distribution. The donor will receive no income tax deduction, but he or she will be in the same position or better because the distribution will not count as income in the first place.
This is just one of the many “tax-friendly” ways you can support Aspen Valley Hospital Foundation and other non-profit organizations that are meaningful to you. If you would like to schedule a confidential meeting with Bill Gustoff to learn more about how to maximize your personal and philanthropic goals while minimizing losses to your estate in taxes, please contact AVHF for a complimentary appointment.
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