PENSION PROTECTION ACT OF 2006 - CHARITABLE IRA ROLLOVER PROVISION
What is it?
On Aug. 17, 2006, President Bush signed into law new tax incentives for charitable gifts. The IRA Charitable Rollover provision allows individuals to make distributions from their IRA accounts directly to Camp Sunshine without recognizing the distribution as income. Key points of the provision are:
You must be at least 70 ½ at the time of the charitable distribution.
You may distribute up to $100,000 per year, for tax years 2006 and 2007.
Distributions must be made directly from the trustee/administrator of your IRA to a qualifying public charity (you cannot receive the distribution prior to gifting to the charity).
Distributions cannot be made to donor advised funds or "supporting organizations" (careful planning is required because many foundations are classified as supporting organizations).
Gifts must be made outright to the charity (they cannot be used to fund charitable remainder trusts or charitable gift annuities).
No charitable deduction is allowed, since this provision allows you to exclude the distribution from income.
Who might benefit?
Individuals who have accumulated IRA assets that may not be needed to support their retirement lifestyle, but are required to take distributions each year. A qualified charitable distribution can partially or completely satisfy annual minimum distribution requirements, without having to recognize the distribution as income.
Individuals who have made, or are contemplating making, charitable gifts that exceed 50% of their adjusted gross income (the maximum amount of deduction allowed for cash gifts). A qualified charitable distribution is not subject to the 50% AGI (Adjusted Gross Income) limitation because no charitable deduction is permitted.
Individuals who own an assortment of smaller IRA accounts that while not substantial in relation to financial needs, nevertheless require owners to keep up with minimum distribution requirements each year. These smaller accounts can be given in their entirety (provided the total amount for all accounts does not exceed $100,000) as a qualified charitable distribution.
Individuals who do not itemize deductions on their federal income tax returns. Many prefer claiming the standard deduction and filing a less complicated return. Making a qualified charitable distribution will not require individuals to itemize, so there will be no need to change their tax preparation preferences.
How can I make a qualified charitable distribution?
In order for the distribution from your IRA to meet the criteria as a qualified charitable distribution, the funds must be transferred directly from the plan administrator of your IRA to Camp Sunshine. You are required to contact the plan administrator to request the transfer.
We also ask that you inform Camp Sunshine directly of the distribution we should expect from your plan administrator. At that time, you can designate how the funds will be used. For your records, we will provide you with a letter acknowledging the amount of the distribution and the date it was received.
Did you know?
Retirement plan accounts are one of the most highly taxed assets that a person can give to their heirs at death –sometimes taxed as much as 70%. Consequently, these accounts are one of the most inefficient assets to pass to family and loved ones, but they are one of the most tax-efficient assets to give to Camp Sunshine to support our program. Not only could you benefit from making an outright distribution now from your IRA, by naming Camp Sunshine as the beneficiary of your retirement account, you could avoid excessive taxation of this asset. And since changing the beneficiary of your account is normally quite simple, any new laws related to estate and IRA taxation that would create the need to make further changes related to beneficiary designations should not be difficult to implement.
Contact us/more information
We urge you to consult your professional advisors regarding this new charitable IRA rollover opportunity. To help insure that your gift meets all requirements as a qualified charitable distribution, please contact Camp Sunshine’s Executive Director Matt Hoidal at 207.655.3800. Matt can also assist you with any questions regarding making Camp Sunshine a beneficiary of your retirement plan.
