Consider an IRA Charitable Rollover

IF YOU:

  • are 70-1/2 or older,
  • have an Individual Retirement Account (IRA), and
  • do not depend upon your required minimum distribution from your IRA for living expenses,

the following information may be of interest to you.

In late 2015, authorization of the IRA charitable rollover was made permanent. The provision allows individuals age 70½ or older to make tax-free gifts totaling up to $100,000 from a traditional IRA account directly to qualified charities. While you cannot claim a charitable deduction for IRA gifts, this distribution from your IRA counts towards your minimum required distribution and does NOT trigger income tax for you. It is a tax-free transfer from the IRA account directly to a charitable organization.

A few things to keep in mind:

  • Your gift must come from an IRA account. (401(k), 403(b), SEP IRA accounts, and other retirement accounts do not qualify.)
  • Your gift must come directly from your IRA administrator to the San Juan Preservation Trust. After you submit a request, your IRA administrator will either mail a check or send you a check payable to the Preservation Trust for you to send.
  • As the donor, you must be age 70½ or older when the gift is made.
  • Total IRA gifts in any one year cannot exceed $100,000, per person.
  • Your gift from your IRA will be excluded from income.
  • Your gift from your IRA will not be available as an income tax charitable deduction.
  • Contact your retirement plan administrator to arrange a Qualified Charitable Distribution (QCD). You may wish to download, complete and send this form to the administrator to initiate the QCD.

While the IRA Charitable Rollover may not be the best tax-deduction mechanism for some donors (check with your financial advisor!), it may have benefits from an estate planning perspective. Retirement accounts are frequently bequeathed to heirs but are among the most highly-taxed assets of an individual’s estate. In some cases, they may even be subject to income tax. Therefore, directing all or a portion of one’s required minimum distribution for charitable giving may be a better choice if a donor is concerned about avoiding estate taxes.

The San Juan Preservation Trust does not offer tax or legal advice. It’s a good idea to check with your professional tax advisor to make sure that any charitable giving strategy makes sense for you.