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 5

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 would like to use his IRA to leave a lasting legacy, but is worried about outliving his retirement fund as his family has a history of long life. Quentin would like to use his RMD creatively to make a charitable gift with income for his lifetime.

Question:

Quentin has discussed charitable remainder trusts (CRTs) and charitable gift annuities (CGAs) with his professional advisor in the past, and he is curious whether one of these life income arrangements might be beneficial in his circumstances. May Quentin use an IRA charitable rollover gift to fund a CRT or CGA?

Solution:

Under current law, an IRA charitable rollover may only be made by a direct transfer from the IRA custodian to charity. The entire distribution transferred to the charity must qualify for a Sec. 170 charitable deduction. Sec. 408(d)(8)(C). In other words, the donor may not receive anything of value in return for the distribution. This includes admission to a charity dinner, preferred seating at sporting events and life income. If Quentin were to fund a CRT or CGA with his IRA RMD, he would be taking a taxable distribution from his IRA and then making a tax-deductible gift of the cash received. Quentin is not thrilled by this idea because he does not itemize his tax deductions.

Editor’s Note: The Legacy IRA Act has been introduced in Congress but has not yet been passed by either the House or the Senate. If passed, this bill would expand the reach of IRA gifts. The IRA charitable rollover limit would remain $100,000 per year for direct transfers to charity from IRA owners age 70½ or older. The Act would expand IRA gifts to allow the funding of split-interest gifts for donors age 65 or older to CRTs and CGAs up to $400,000. The income payments from the CRT or CGA would be fully subject to tax. The Legacy IRA Act would increase the number and value of IRA charitable gifts.

Published January 31, 2020
Print
Email
Subsribe to RSS Feed

Previous Articles

Gifts from IRAs, Part 4

Gifts from IRAs, Part 3

Gifts from IRAs, Part 2

Gifts from IRAs, Part 1

Lucky Lucy Lindstrom's Flood Recovery Plan

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