Charitable givers get a break

October 26, 2008|By BRAD SELL

Since 1974, millions of Americans have saved billions of pre-tax dollars in Individual Retirement Accounts (IRAs). Thanks to continued savings and investment returns, an estimated $3.6 trillion is currently invested in IRAs and the total continues to grow.

On Oct. 3, Congress extended a federal law allowing IRA owners to share the wealth of their retirement savings by giving directly to charity-without first counting it as income and paying income tax.

This is a wonderful win-win -- for people who would rather give to charity than pay taxes -- and for the nonprofit organizations they choose to support.

Thanks to decades of deliberate saving and favorable investment returns, a substantial share of today's retirees have more money in their IRAs than they'll ever need. Many have expressed an interest in giving the funds to charity but, until this law was passed, income tax had to be paid on all withdrawals, which sharply reduced the value of the gift.


Others have asked about designating their children as beneficiaries, but that may draw additional tax consequences.

For larger estates, a good portion of IRA wealth goes to estate taxes and the income taxes of beneficiaries. Experts estimate heirs will receive less than 25 percent of most IRA assets that pass through estates."

By extending the Pension Protection Act of 2006, a different option remains available: Transferring IRA assets directly to charity.

By going directly to the Community Foundation, the money is not included in the IRA owner's income and -- most importantly -- is not taxed, preserving the full amount for charitable purposes. The law covers all gifts made through December 2009.

Holders of traditional and Roth IRAs who are at least 70 years old can make direct charitable transfers up to $100,000 per year.

As a qualified public charity, the Community Foundation can help donors execute the transfers and choose from several charitable fund options for their gift. However, donor-advised funds do not qualify for tax-free IRA transfers.

This really is a limited-time offer. The window is open now, but it will close in 2009 unless Congress extends it.

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.

Through philanthropic services, strategic investments and community leadership, the Community Foundation of Washington County MD, Inc. helps people support the causes they care about, now and for generations to come. For further information call 301-745-5210.

Brad Sell is executive director of the Community Foundation of Washington County MD, Inc. /

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