Community Foundation can help donors make meaningful gifts from IRA assets
Danville, Virginia – On January 2, 2013 President Obama signed the American Taxpayer Relief Act of 2012 (H.R. 8) into law, which renews the Charitable IRA provision of 2006, making it easier for Americans to give to causes they care about. This provision has the power to help local charities strengthen their communities by allowing individuals to roll over up to $100,000 from an Individual Retirement Account (IRA) to charity without being federally taxed. This extension expires December 31, 2013.
Millions of Americans continue to save pre-tax dollars in their IRAs. Thanks to regular investments and long-term returns, an estimated $5.3 trillion is invested in IRAs. The law allows taxpayers 70 ½ and older to share the wealth by giving retirement savings directly to charity—and bypassing income tax.
This law is important to local charities operating as agents of philanthropy in order to continue to build community and improve social service programs that benefit people every day. This tax benefit is scheduled to expire at the end of 2013.
“It is a win-win—for people who would rather give to charity than pay taxes and for the nonprofit organizations they choose to support,” said Debra Dodson, Executive Director of The Community Foundation of the Dan River Region.
Thanks to decades of deliberate saving, some of today’s retirees have more money in their IRAs than they need for daily living expenses and long-term care. Charitable individuals and couples have expressed an interest in giving the funds to charity, but income tax must be paid on all withdrawals, which reduces the value of the gift. Others are concerned about designating their children as IRA beneficiaries, since that may draw unintended tax consequences.
“For larger estates, a good portion of IRA wealth goes to estate taxes and income taxes of beneficiaries,” Dodson said. “Experts estimate heirs may receive less than 50% of IRA assets that pass through estates.” A provision in the federal law extends this special option: transferring IRA assets directly to charity. By going directly to a qualified public charity such as The Community Foundation, the money is not included in the IRA owner’s income and—most important—is not taxed, preserving the full amount for charitable purposes.
Through 2013, holders of traditional IRAs who are at least 70½ years old can make direct charitable transfers up to $100,000. Individuals may exclude the amount distributed directly to an eligible charity from their gross income. The Community Foundation of the Dan River Region can help donors execute the transfers and choose from several charitable fund options for their gift. Donor Advised Funds do not qualify for tax-free IRA transfers.
“This really is a powerful and limited opportunity. The window will close at the end of the year,” said Dodson. “For anyone interested in establishing a permanent legacy in this community, this is the opportunity of a lifetime to make the gift of a lifetime.”
For more information about charitable IRA transfers or other year-end giving strategies, contact The Community Foundation of the Dan River Region at 434-793-0884 or https://www.cfdrr.org
Gift of a Lifetime: Shopping for Charity
Having more retirement money than you need is a great problem to have, and one that’s now easier to solve. But generous IRA donors still face multiple options for their gifts: Support the entire community? Underwrite a special cause? Shore up a favorite charity? Here are three top charitable fund picks of Debra Dodson, Community Foundation of the Dan River Region Director
Community Foundation Unrestricted Fund —Meeting ever-changing community needs.
IRA transfers to The Community Foundation Unrestricted Fund address a broad range of current and future needs. The Community Foundation evaluates all aspects of community well-being—arts and culture, community development, education, environment, health and human services—and awards strategic grants to select projects and programs.
Dodson: “For people who care deeply about this community and its people, this fund is an excellent way to address our most pressing needs, today and tomorrow.”
Field of Interest Fund—Connecting personal values to high-impact opportunities.
IRA transfers to Field of Interest Funds allow donors to target gifts to causes important to them: arts, cancer support, youth and families, animal welfare and more. The Community Foundation of the Dan River Region awards grants to community organizations and programs addressing the donor’s specific interest area.
Dodson: “For those who are particularly passionate about a single cause, Field of Interest Funds provide strategic, lasting support—even as needs change over time.”
Designated Fund—Helping local organizations sustain and grow.
IRA transfers to Designated Funds allow donors to support the good work of specific nonprofit organizations —a church, local fire department, food banks, museum or any qualifying nonprofit charitable organization.
Dodson: “For people who want to help continue their support of their favorite charities, our endowed Designated Funds give nonprofits a steady stream of income for years to come.”