| If you are over 70 1/2 years old, want to | | | | 3. If given to a charity, rules which limit |
| make a gift for a special charitable project, | | | | the amount that could be deducted as a |
| but your only liquid asset is your IRA, I | | | | charitable contribution would have to be |
| have good news for you. | | | | followed. This means that they may still have |
| | | | to pay tax on a portion of their IRA |
| On August 17, 2006, the Pension Protection | | | | withdrawals. |
| Act of 2006 (PPA 2006) was signed into law. | | | | |
| This nearly 1,000 page piece of legislation | | | | But thanks to provisions in PPA 2006, Roger |
| marked the most sweeping changes to the | | | | and Claire can make their gift to the Humane |
| pension arena in 30 years. | | | | Society and Bill and Diane can pay off their |
| | | | church's new organ using money from their |
| Let me give you two common examples that | | | | IRAs and not pay any tax on the withdrawals. |
| contain problems faced by seniors solved by | | | | But they have to follow the rules... |
| PPA 2006... | | | | |
| | | | 1. First, you must be at least 70 1/2. |
| Roger and Claire are retired. Roger spent his | | | | |
| working career in the aerospace industry. He | | | | 2. You can give up to $100,000. |
| was more than well compensated and over the | | | | |
| years accumulated a very large 401(k) plan. | | | | 3. This only applies to 2006 and 2007. |
| When he retired, he rolled his 401(k) into an | | | | |
| IRA. Other than their home, the IRA is far | | | | 4. You can't withdraw the money from your IRA |
| and away their biggest asset. | | | | and then give it to your charitable cause. |
| | | | The transfer must be made directly from the |
| For years, Roger and Claire have been | | | | custodian of the IRA to the charity. |
| supporters of the Humane Society. Their local | | | | |
| chapter is building an entire new wing on to | | | | 5. These gifts, called IRA charitable |
| their kennels. Roger and Claire would love to | | | | rollovers, count towards your required |
| make a significant donation-somewhere in the | | | | minimum distribution for the year. |
| neighborhood of $50,000 to $100,000. | | | | |
| | | | 6. IRA charitable rollovers are not permitted |
| Bill and Diane both worked during their | | | | for gifts to donor advised funds and |
| entire careers. Mary taught 6th grade for 40 | | | | supporting organizations. However, there are |
| years. Bill was a career military officer. | | | | some exceptions that apply to funds held by |
| After his retirement, he spent another 20 | | | | community foundations: scholarship, field of |
| years working in the private sector. Like | | | | interest, and designated funds qualify. So |
| Roger, Bill has a large IRA. | | | | the first step is to contact your intended |
| | | | cause to see how they are classified and |
| When Bill turned 70 1/2, he was required to | | | | whether or not the law allows an IRA |
| start taking the minimum required | | | | charitable rollover gift. |
| distributions each year from his IRA. But | | | | |
| Bill and Diane don't need the income; their | | | | 7. The gift must be a pure gift. In other |
| other retirement income sources are more than | | | | words, there can't be any personal benefit |
| adequate. Nevertheless, Bill must take these | | | | strings attached like tickets to an event. |
| RMDs and pay tax on them as income. | | | | |
| | | | 8. You don't have to report the IRA |
| Bill and Diane have been active in their | | | | charitable rollover as income. |
| church all their married life. Their church | | | | |
| just bought a new organ. The church did not | | | | 9. However, you don't get a charitable |
| pay cash for the organ; the majority of it | | | | deduction for your gift. Sorry, you can't |
| was financed. Bill and Diane would like to | | | | have your cake and eat it too. |
| pay off the organ. | | | | |
| | | | This new law is a real winner. In these two |
| Both Roger and Claire and Bill and Diane are | | | | examples, the Humane Society is able to build |
| warm-hearted people. But, prior to the | | | | new kennels and a church pays off an organ |
| passage of PPA 2006, their generosity could | | | | they thought they were going to have to |
| have been thwarted by several things... | | | | finance. The donors were able to make it |
| | | | happen despite the fact that the only real |
| 1. In both cases, their principal liquid | | | | asset they had was an IRA. |
| asset was an IRA. Neither couple had other | | | | |
| assets from which to make a gift. | | | | I do not dispense tax advice. It is |
| | | | imperative that you consult with your tax |
| 2. If the large sums were withdrawn from | | | | advisor and the charity to make sure it is |
| their IRAs, they would be subject to ordinary | | | | qualified and that the gift is made in the |
| income tax. | | | | proper manner. |
| | | | |