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
Much attention in this area has focused on the federal law, the IRA Charitable Rollover. After years of being temporary, the law was finally made permanent. I write all about the IRA Charitable Rollover in this blog post, and I even have a short video explaining it.
But, the IRA Charitable Rollover has strict limitations. Specifically, the IRA Charitable Rollover has two mandatory requirements. First, the donor must be over age 70½. Second, the retirement benefit plan must be an IRA.
What about younger donors, or people who have different, unique, kind of retirement benefit plans? There are at least three 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. In the clear majority of such cases, I’m betting a charitable gift made in this manner would at the least be tax neutral for you, the donor.
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 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).
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 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.
Of course there’s always much more to be discussed when it comes to charitable giving. I would love to discuss your ideas and options. Don’t hesitate to contact me by phone at 515-371-6077, or email, Gordon@gordonfischerlawfirm.com.