Giving…A Way of Life…
             A Way of Living!                                   

Giving Possibilities through Your IRA

If you are 70.5 years of age or older, recent federal legislation will benefit you!

On Aug. 17, 2006 President Bush signed the Pension Protection Act of 2006. For the first time ever, a law allows an individual, who is at least 70½ , to make a donation from their Individual Retirement Account (IRA) to any qualified charity, like East Valley Senior Services, Inc. or East Valley Senior Services Foundation, Inc.

The individual doesn’t have to report the amount of the gift as income for federal taxes. 
If you are fortunate enough to do charitable giving from your IRA, this law could be of interest to you. Following are highlights of the law that you may want to take advantage of prior to December 31, 2007.

You must be at least 70.5 years of age at the time of donating from your IRAs, Roth IRAs, inactive SEP and simple IRAs. Gifts from other retirement plans such as 401 (k) or 403 (b) do not qualify. However, you may be able to roll assets from other types of qualified retirement plans into an IRA account and then make the charitable gift. 

Highlights:

• Gifts up to $100,000 per year per person. Husband & wife can make a donation.

• Gifts must be made outright to a qualifying charity from your IRA administrator.  

• Recipient charity may not be a donor advised fund, a supporting organization or private foundation.

• You cannot receive any benefit from the charity in return for your gift.

• Gifts must be made by December 31, 2007.
  Information in this article is intended for educational purposes. Consult with appropriate professionals as this law relates to your financial situation.

For more information concerning this federal tax law, read on…

Giving Possibilities Through Your IRA

Good for You…Good for East Valley Senior Services Foundation.

On Aug. 17, President Bush signed the Pension Protection Act of 2006. For the first time ever, this law allows an individual who is at least 70½ to make gifts from an Individual Retirement Account (IRA) to any qualified charity, including East Valley Senior Services Foundation. The individual does not have to report the amount of the gift as income for federal tax purposes. This type of transfer is being referred to as an “IRA charitable rollover” or a “Qualified Charitable Distribution” (QCD).
If you are at least 70 ½ years old and you’re fortunate enough to do charitable giving from your IRA, this law could be of interest to you. Following are answers to questions you might have:

Question: Under prior law, couldn’t I make charitable gifts during my life from my IRA?
Yes, but there may have been income tax consequences. Under prior law, an individual 59½ or older was free to withdraw funds from his IRA and then donate them to charity. However, the amount of the withdrawal had to be included in the individual’s gross income for federal tax purposes. The individual, if eligible to itemize deductions, could claim an income tax deduction for the transfer to the charity. Two problems arose:
• First, in many cases the deduction would not offset the income, and the individual still paid taxes even though the entire withdrawal amount was given to charity.
• Second, inclusion of the IRA withdrawal in the individual’s income could reduce certain deductions that are tied to the amount of an individual’s adjusted gross income, such as the medical expense deduction.   

Question: How is the new IRA charitable rollover law different?
Under the new law, amounts are transferred directly from an IRA to charity. The funds do not need to be first withdrawn and put into the IRA owner’s separate account. In addition, the amounts transferred to charity that otherwise would be taxable if withdrawn by the individual are excluded from the individual’s gross income for tax purposes. Because the gift amount is excluded from income, there is no income tax deduction for the gift. The bottom line is that there are no federal income tax costs when you make a qualified IRA charitable rollover.

Question: Who is likely to benefit from this new law?
If any of the following applies to you, you may benefit from this new law:
• You are required by law to take distributions from your IRA but you don’t need the income. Note: this Qualified Charitable Distribution can be used to satisfy the IRA owner’s required minimum distribution for the tax year.
• You would like to make gifts to charity in excess of 50 percent of your adjusted gross income.
• You do not itemize your deductions.
• You itemize your medical or miscellaneous expenses, and you don’t want these deductions reduced.
• Your income level ($150,500 in 2006) triggers the phase-out of your itemized deductions, or
• You would like a simple, easy way to give to charity from your IRA.

Question: Do all charitable gifts from a retirement plan qualify under the new law?
No, in order for the gift to qualify, the following requirements must be met:
• You must be at least 70 ½ years old at the time of the transfer from the IRA.
• The gift must be from an IRA. Gifts from other retirement plans such as 401(k)s or 403(b)s will not qualify. However, you may be able to roll assets from other types of qualified retirement plans into an IRA account and then make the charitable gift.
• The recipient charity may not be a donor advised fund, a supporting organization, or a private foundation.
• The gift must be made outright to the charity. Gifts to charitable trusts, gift annuities, pooled income funds, or other planned giving vehicles do not qualify.
• You cannot receive any benefit from the charity in return for the gift.
• Gifts must be made by Dec. 31, 2007.
• The gifts you make from your IRA in a year cannot exceed $100,000.  Your spouse, if 70½, also can give up to $100,000 per year from his or her own IRA. Give what you can afford, up to $100,000.
If the aggregate of qualified charitable distributions exceeds $100,000 in a tax year, the excess amount cannot be carried over to the following year, and must be included in the taxpayer’s gross income for the tax year in which the excess distribution was made.

Question: Does the IRA charitable rollover also receive beneficial income tax treatment under state law?
You should check with your tax adviser on this question since the answer will be different depending on where you live.  

Question: Does a lifetime charitable gift from my IRA offer any benefit other than tax savings?
Yes. It provides you with the opportunity to make a gift during your lifetime when you can see and enjoy the impact of your generosity. Previously, those who wanted to use IRA assets to make gifts to EVSS Foundation often avoided the tax burdens by having the assets paid to the Foundation after their death.

Question: Does the distribution from the IRA have to qualify in its’ entirety as a charitable contribution deduction?
Yes, if any part of the charitable contribution fails to qualify as a deduction, none of the IRA distribution is excluded from income.

Question: How do I make a gift to East Valley Senior Services Foundation under the new law?
• Consult with your financial, legal or tax advisers as to how this new law applies to you.
• Decide how you want EVSS Foundation to use your gift. You can support a specific program. Or you can support future growth of the organization, and have your gift go to the general fund. 
• Contact your IRA administrator, to make a gift directly from your IRA to EVSS Foundation. Your IRA administrator will tell you what is needed to fulfill your request. Ask your IRA administrator to indicate on the transfer of funds that you are the donor.  (Charitable distribution must be made directly by the IRS trustee (administrator) to the charitable organization).
• Contact East Valley Senior Services Foundation at
480-964-9014 ext. 107 to let us know the amount of the gift, the name of the IRA administrator, and how you want EVSS Foundation to use your gift.
• Start this process well before Dec. 31, 2007. Your gift must be made before year’s end.
 
Information in this article is intended for educational purposes. Consult with appropriate professionals as this law relates to your financial situation.