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Retirement Benefit plans helping charity

Much of Iowans’ wealth can be found in retirement benefit accounts, like IRAs, 401(k)s, 403(b)s, and so on. Funds from retirement benefit plans can be easy and tax-savvy ways for you to support your favorite causes and organizations!

IRA Charitable Rollover

The Individual Retirement Account (IRA) charitable rollover allows individuals aged 70.5 years of age and older to donate up to $100,000 from their IRAs directly to charities, without having to count the distributions as taxable income. This gift transfer is called a qualified charitable distribution (QCD).

To be clear, there are two threshold requirements to take advantage of the IRA charitable rollover. The first is that to be eligible you must be 70.5 years of age or older. An important nuance to note is the required annual distribution is based on the year the participant reaches age 70.5, not the day they reach that age.

The second threshold requirement is the IRA charitable rollover applies to IRAs only. Under the lawcharitable gifts can only be made from traditional IRAs or Roth IRAs. The IRA charitable rollover does not apply to 403(b) plans, 401(k) plans, pension plans, and other retirement benefit plans.

What about younger donors, or people who have different, unique, kind of retirement benefit plans? There are at least a couple of good alternatives to consider.

Required Minimum Distributions

Generally, an account holder must start taking Required Minimum Distributions (RMDs) after age 70½. And, sometimes, much younger folks must take RMDs when they inherit a retirement benefit account. If you’re already having to take RMDs, why not use those funds to support your favorite charity?

There is a (pretty severe) tax penalty if you withdraw funds from a retirement benefit plan too early. But, generally speaking, individuals over 59½ years of age may withdraw funds from retirement plans without any penalty. So, in such cases, a donor can withdraw funds, make a gift with these funds, and then claim an offsetting federal income tax charitable deduction. Keeping in mind that every donor’s situation is unique, in the clear majority of such cases, a charitable gift made in this manner would at the least be tax neutral for the donor.

Beneficiary Designations

No matter what age, no matter what type of retirement benefit plan, there is a very easy way for you to help your favorite charity. Simply name the charity as the beneficiary!

It’s been my experience that many folks don’t consider or realize they can make a meaningful gift by naming a nonprofit as the beneficiary of IRA, 401(k), 403(b), or another plan. This is simple and does not require drafting a will or testamentary trust. (It is true that if the account holder is married, the spouse should be informed and may have to consent to gift).

Keep Beneficiary Designations Current

This is a good time for a  reminder to check your beneficiary designations not only on your retirement benefit plan but on ALL such accounts or funds. Savings accounts, checking accounts, mutual funds, stock portfolios, annuity contracts—all these have beneficiary designations (also sometimes called “payable on death” or “transfer on death”). Are your beneficiary designations current? Or is there an ex-spouse still named as a beneficiary on your IRA? Make sure to keep your beneficiary designations current, and while doing so, consider naming our favorite nonprofits as beneficiary. Your gift could make a tremendous difference.

Contact Me

Of course, there’s always much more to be discussed when it comes to charitable giving. I would love to hear your ideas and charitable giving goals. Don’t hesitate to contact me by phone at 515-371-6077, or email, Gordon@gordonfischerlawfirm.com.

I’m excited to present an upcoming Expert Edge Seminar hosted by the Iowa City Area Chamber of Commerce. The presentation topic, Succession Success: Business Planning in Six Simple Steps, is super important and relevant for entrepreneurs and business owners. 

Iowa City Area Chamber of Commerce Logo

Why? Because taking calculated risks in business is often smart, but taking risks with the future of your business is a gamble you don’t want to chance.

Business owners should certainly have a personal estate plan, but also a business succession plan as well.

Through my practice I’ve worked with many business owners (and nonprofit leaders) on the “what, why, and how” of planning for a lasting legacy. My (interesting, engaging, and not boring) presentation will include the important elements:

  • What is a “business will?”
  • Why do you need a business succession plan?
  • How can your small business support your favorite charities and your retirement simultaneously?
  • Six essential steps for succession success

Take some time out of your work day to invest in your future; I would love to see you at the presentation on Wednesday September 13, 11:30 a.m.-1 p.m. The cost includes lunch and is $15 for members and $25 for non-members. The location will be at the beautiful BioVentures Center, 2500 Crosspark Road, Coralville.

Definitely save your spot for what should be an informative, interesting, and even fun lunch hour. Click here to register on the Iowa City Chamber of Commerce website.