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Mary Command
Mary Command

Help Your Clients Make the Gift of a Lifetime

Giving retirement assets to charity, tax free.

January 22, 2009
by Mary Command

In 2009, qualified American seniors can make the gift of a lifetime by transferring a portion of their individual retirement accounts (IRAs) to charity, free from federal tax. Qualified IRA holders can transfer up to $100,000 per year without incurring income taxes today or estate and income taxes in the future. If married, each spouse can transfer up to $100,000 per year from his or her IRA. Community foundations throughout the United States can help individuals and couples give in this special way.

2008 legislation contains a series of charitable incentives, including qualified charitable distributions of IRAs. Americans age 70½ or older can make tax-free IRA contributions to certain public charities such as Field of Interest, Unrestricted or Designated funds at the community foundation. Gifts to Donor Advised Funds, Supporting Organizations and private foundations do not qualify for preferential tax treatment.

Your clients may be interested in this charitable opportunity if they:

  • Have excess retirement savings.
  • Are subject to a 50 percent of income charitable deduction limitation.
  • Take the standard deduction on their tax return.
  • Have an adjusted gross income above $159,950 ($79,975 for married filed separately), making them subject to a phase-out of itemized deductions.
  • Are planning to leave a charitable legacy through an estate plan.
  • Have designated a favorite charity as beneficiary of retirement assets.
  • Care about the community and want to know their gifts will make a difference.

Example: Mr. Smith, age 75, has accumulated approximately $2 million in his IRA accounts. He has other sources of wealth and plans to leave a sizable estate to his heirs and charity. Under the new law, Mr. Smith can create a fund at the community foundation to address the causes he cares about most by transferring IRA funds tax free. Mr. Smith can transfer up to $100,000 in 2009. In addition, if Mr. Smith is married, his wife can also make similar gifts from her IRA accounts.

Individuals who may benefit most from the new law include two-thirds of Americans who do not itemize income tax deductions. The tax law gives eligible donors the equivalent of a tax deduction for charitable gifts that they transfer from their IRAs. The IRS estimates that 5.7 million higher-income taxpayers claim the standard income tax deduction and do not get any tax benefit from their charitable gifts.

"The community foundation can help your clients fulfill their charitable goals. This is the opportunity of a lifetime to make the gift of a lifetime," says Donnell Mersereau, Council of Michigan Foundations.

Though the legislation has extended charitable possibilities for IRAs, it remains prudent for wealth advisors to analyze each client's unique situation to determine the best assets to give. If a client wishes to liquidate appreciated stock, mutual funds or real estate, capital gains may be avoided by contributing these assets to the community foundation. Appreciated assets are usually preferable over IRAs for passing on to heirs.

Charitable IRA transfers are just one way the community foundation can work with you to help your clients achieve their personal, financial and charitable goals. You can rely on your local community foundation as the single, trusted vehicle your clients can use to target the causes they care about most, while gaining maximum tax benefit under state and federal law.

For more information, contact your local community foundation. www.communityfoundations.net

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© Community Foundations 2008-2009

Mary Command is a senior consultant who leads engagements involving strategic marketing planning, communications program development and implementation and information management. She uses her skills in business, marketing, communications, finance, and technology to help clients improve and sustain results. Command has consulted with philanthropic organizations since the mid 1990s on marketing, branding and communications. She has extensive experience in the community foundations field where she has led innovative programs to create proven marketing strategies and tools, advance brand development, and build the communications capacity of these organizations. Command who began her career as a Certified Public Accountant, has been a member of the Williams Group strategic planning team since 1990.