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