finance article No.23205 How To Make A Sizable Charitable Donation From Your IRA-Tax Free [Some words in this document 70 years liquid 2006 was nearly 30 Roger Claire career very 401 plan 500 during supporters wing significant donation- somewhere entire careers 6th Bill military officer private Like turned required start Diane income RMDs tax married organ becoming hazardous play smoke church did cash pay devotion charitable causes people organizations reach PPA thwarted things cases principal asset IRA couple make withdrawn limit amount contribution still provisions gift new frac12 100 must custodian rollovers permitted held community designated qualify classified law allows like event winner Society finance donors happen fact had extended beyond game put leave know involved advisor ] If you are over 70 ½ years old, want to make a gift for a special charitable project, but your only liquid asset is your IRA, I have good news for you. On August 17, 2006 the Pension Protection Act of 2006 (PPA 2006) was signed into law. This nearly 1,000 page piece of legislation marked the most sweeping changes to the pension arena in 30 years. Let me give you two common examples that contain problems faced by seniors solved by PPA 2006... Roger and Claire are retired. Roger spent his working career in the aerospace industry. He was more than well compensated and over the years accumulated a very large 401(k) plan. The plan grew nearly 500% during one 5 year bull market. When he retired, he rolled his 401(k) into an IRA. Other than their home, the IRA is far and away their biggest asset. For years, Roger and Claire have been supporters of the Humane Society. Their local chapter is building an entire new wing on to their kennels. Roger and Claire would love to make a significant donation-somewhere in the neighborhood of $50,000 to $100,000. Bill and Diane both worked during their entire careers. Mary taught 6th grade for 40 years. Bill was a career military officer. After his retirement, he spent another 20 years working in the private sector. Bill and Diane have more retirement plans than Carter has pills. Like Roger, Bill has a large IRA. When Bill turned 70 ½, he was required to start taking the minimum required distributions each year from his IRA. But Bill and Diane don't need the income; their other retirement income sources are more than adequate. Nevertheless, Bill must take these RMDs and pay tax on them as income. Bill and Diane have been active in their church all their married life, all 45 years of it. Their church just bought a new organ. It was a purchase of necessity inasmuch as the old (very old) organ was becoming hazardous to play. The organist had to be careful or the organ would start to smoke. So, needless to say, the church did not pay cash for the organ; the majority of it was financed. Bill and Diane would like to pay off the organ. Both Roger and Claire and Bill and Diane are warm-hearted people. Their devotion to charitable causes and their church is representative of the many people who support charitable organizations which reach out to help people. But, prior to the passage of PPA 2006, their generosity could have been thwarted by several things... 1. In both cases, their principal liquid asset was an IRA. Neither couple had other assets from which to make a gift. 2. If the large sums were withdrawn from their IRAs, they would be subject to ordinary income tax. 3. If given to a charity, rules which limit the amount that could be deducted as a charitable contribution would have to be followed. This means that they may still have to pay tax on a portion of their IRA withdrawals. But thanks to provisions in PPA 2006, Roger and Claire can make their gift to the Humane Society and Bill and Diane can pay off their church's new organ using money from their IRAs and not pay any tax on the withdrawals. But they have to follow the rules... 1. First, you must be at least 70 ½. 2. You can give up to $100,000. 3. This only applies to 2006 and 2007. 4. You can't withdraw the money from your IRA and then give it to your charitable cause. The transfer must be made directly from the custodian of the IRA to the charity. 5. These gifts, called IRA charitable rollovers, count towards your required minimum distribution for the year. 6. IRA charitable rollovers are not permitted for gifts to donor advised funds and supporting organizations. However, there are some exceptions that apply to funds held by community foundations: scholarship, field of interest, and designated funds qualify. So the first step is to contact your intended cause to see how they are classified and whether or not the law allows an IRA charitable rollover gift. 7. The gift must be a pure gift. In other words, there can't be any personal benefit strings attached like tickets to an event. 8. You don't have to report the IRA charitable rollover as income. 9. However, you don't get a charitable deduction for your gift. Sorry, you can't have your cake and eat it too. This new law is a real winner. In these two examples, the Humane Society is able to build new kennels and a church pays off an organ they thought they were going to have to finance. The donors were able to make it happen despite the fact that the only real asset they had was an IRA. I hope this law is extended beyond 2007. But like anything new, the name of the game is to communicate what is possible. The law was put into effect in late August 2006, so that didn't leave a lot of time for IRA charitable rollovers that year. If you, or anyone you know, has an IRA and would like to make a gift, make them aware of this new option. If you are involved in a public charity, help their planned giving officer get the word out. I do not dispense tax advice. It is imperative that you consult with your tax advisor and the charity to make sure it is qualified and that the gift is made in the proper manner. This document is made by wendang from a free article Please see its Term Of Use Article Source: www.ArticlesBase.com The link of the article:http://www.articlesbase.com/finance-articles/how-to-make-a- sizable-charitable-donation-from-your-iratax-free-101164.html All Documents-Documents in This Collection-Most Viewed Documents-Documents about Loan-Love [all 346 words in this document] 000 1 100 17 2 20 2006 2007 3 30 4 40 401 45 50 500 6th 70 8 9 a able accumulated act active adequate advice advised advisor aerospace after all allows amount an and another any anyone anything applies apply are arena as asset assets attached august aware away be becoming been benefit beyond biggest bill both bought build building bull but by cake called can career careers careful carter cases cash cause causes changes chapter charitable charity church claire classified common communicate community compensated consult contact contain contribution could count couple custodian deducted deduction designated despite devotion diane did didn directly dispense distribution distributions do don donation-somewhere donor donors during each eat effect entire event examples exceptions extended faced fact far field finance financed first follow followed for foundations frac12 from funds game generosity get gift gifts give given giving going good grade grew had happen has have hazardous held help his home hope how however humane imperative inasmuch income industry intended interest into involved ira iras just kennels know large law least leave legislation let life like limit liquid local lot love made majority make manner many marked market married mary may means military minimum money more most must name nearly necessity need needless neighborhood neither nevertheless new news of off officer old only option ordinary organ organist organizations out over page passage pay pays pension people permitted personal piece pills plan planned plans play portion possible ppa principal prior private problems project proper protection provisions public purchase pure put qualified qualify reach real report representative required retired retirement rmds roger rolled rollover rollovers rules say scholarship sector see seniors several signed significant smoke society solved sorry sources special spent start step still strings subject sums support supporters supporting sure sweeping take taking taught tax than thanks that their them then there these they things this thought thwarted tickets time too towards transfer turned two using very want warm-hearted was well were what when whether which who wing winner with withdraw withdrawals withdrawn word words worked working would year years you your
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