Planned Giving

Your act of generosity, our longevity

With planned giving, you can provide long-lasting support for Boys & Girls Clubs of South Puget Sound while enjoying financial benefits for yourself.

Text Resize
Print
Email
Subsribe to RSS Feed

Friday April 10, 2020

Case of the Week

Gifts from IRAs, Part 4

Case:

Quentin Charles Douglas was the firstborn child in a large family. Throughout his childhood, Quentin's parents worked hard to put food on the table for their children. They also instilled in Quentin the value of hard work and saving money. Quentin took those lessons to heart, putting forth his best effort in school, finding a rewarding job and putting away as much in savings as he could. For many years, Quentin worked for a company that offered a 401(k) plan. During those years, he put as much into his 401(k) as he could afford so that he could maximize the benefit of his employer's matching contributions. Eventually, Quentin moved on to other employment and made a tax-free rollover of his 401(k) into an IRA. As he approached retirement, Quentin continued to contribute to his retirement savings by maxing out his IRA contributions each year.

With his lifelong penchant for saving money and some savvy investing, Quentin was able to retire comfortably at age 65. Now in his early 70s, Quentin realizes that he will soon be taking required minimum distributions (RMD) from his IRA. Given his lifetime savings, investment income and social security distributions, Quentin does not feel he needs the additional income that the IRA distributions will provide – especially with the increased taxes tied to that income.

Question:

Having spoken with his advisor about making an IRA charitable rollover gift to charity, Quentin is excited to move forward. Quentin is preparing to send the IRA custodian a letter directing a distribution to his favorite charity when he remembers that he has a checkbook associated with his IRA account. Quentin wonders whether he could just skip the step of sending a letter to the custodian and just write a check to the charity himself.

Solution:

While it would not be permissible for Quentin to request a distribution to himself from the IRA and then write a check for the same amount to charity from his personal checking account, Quentin may use his IRA checkbook to make a qualified charitable distribution (QCD). The IRA distribution must be a direct transfer from the IRA custodian to charity.

IRS Notice 2007-7 answers a number of questions related to the QCD rules. In Question and Answer 41, the Notice states, "If a check from an IRA is made payable to a charitable organization described in Sec. 408(d)(8) and delivered by the IRA owner to the charitable organization, the payment to the charitable organization will be treated as a direct payment by the IRA trustee to the charitable organization for purposes of Sec. 408(d)(8)(B)(i)." It would appear from the IRS' explanation that the operative question is not whether the IRA owner has received physical possession of the check, but whether the check is payable to the IRA owner. This is a gray area, but it seems that as long as Quentin makes the check payable to his favorite charity rather than to himself, the distribution may qualify as a QCD.

The advisor also explained that if Quentin decides to send the charity a check from his IRA checkbook, he should do so well in advance of the end of the year. The mailbox rule usually allows checks sent on December 31 and received by a charity in January to count as a charitable gift in the year the check was mailed. However, the IRA charitable rollover is made "directly by the trustee" to a charitable organization. When the IRA owner writes a check and delivers it to charity, the custodian of the IRA has not yet made the transfer. The custodian in this case will only act once the charity has deposited the check. Therefore, if the IRA owner puts the check in the mail on December 28, the charity receives the check on January 2 and then the check is deposited on January 3, the QCD will not count as being made in December. Instead, the IRA owner will have made a QCD in January of the new year.

Quentin takes his advisor's words to heart and decides to write a check to charity from his IRA checkbook. He makes the check payable to his favorite charity and puts it in the mail on December 1. The charity receives the check two days later and promptly deposits it, allowing Quentin to make his IRA charitable rollover before year's end.

Published January 24, 2020
Print
Email
Subsribe to RSS Feed

Previous Articles

Gifts from IRAs, Part 3

Gifts from IRAs, Part 2

Gifts from IRAs, Part 1

Lucky Lucy Lindstrom's Flood Recovery Plan

Lucky Lucy's Foundation Goes Public

scriptsknown

Gift Options

Donor Stories

Learn how others have made an impact through their acts of giving to our organization and others. Explore the many benefits of charitable gift planning.

more

How to Give

Learn how to make a gift that provides tax benefits and even life income.

more

What to Give

Find out what type of assets make the best planned gifts. Learn about gifts of cash, securities and property.

more

Planned Gifts Calculator

View a presentation that shows the benefits of a planned gift based on your property and goals.

more

News

Personal Planner

Bequests to Your Favorite Charity Bequests to charity are the most popular type of planned gift. A donor may retain assets during life and then leave a...

more

Finance News

Hewlett-Packard Continues Resurgence Treasuries Rise on Mixed Economic Data Interest Rates Stay Low

Savvy Living

Personal Tech Products Designed Specifically for Seniors. Can you recommend any tablets, smartphones or computers that are specifically designed for seniors? I would like to buy...

more

Washington News

IRS End-of-Year Tax Tips

In IR-2014-110, the IRS offered tax tips for end-of-year charitable giving. 1. Household or Clothing Gifts ? These items must be in good used condition or better..

more

For Advisor

Advisor Resources

We have a complete tax update service for CPAs, attorneys, CLUs, CFPs, ChFCs, trust officers and other professional friends.

more

Deduction Calculator

The GiftLaw Calculator is a planned gifts calculator for professionals that follows the IRS format

more

Private Letter Ruling

Estate Distributes to Foundation without Self-Dealing

Decedent formed Company and subsequently formed Irrevocable Trust...

more

Washington News

IRS End-of-Year Tax Tips

In IR-2014-110, the IRS offered tax tips for end-of-year charitable giving. 1. Household or Clothing Gifts ? These items must be in good used condition or better.

more

GiftLaw Pro

Charitable Tax Reference

GiftLaw Pro is a complete charitable giving and tax information service inside the GiftLaw website...

more

Case of the Week

Living on the Edge, Part 4

Rhea Jones, 75, lives in a beautiful coastal town in northern California. Rhea?s home occupies three...

more

Article of the Month

Gifts of Pass-Through Business Interests

A charitable gift of a business interest can make a wonderful gift to charity. At the same time,...

more