If you have clients who would like to donate more to Katrina relief and who have funds tied up in IRA accounts, this could be part of your year-end strategy. Under the pending legislation, anyone 70 1/2 years old and older would be allowed to roll over amounts from their IRA accounts (and other pension plans that can first be rolled into an IRA) directly to a qualified charitable organization on a tax-free basis.
Taxpayers aged 59 1/2 years old and older would be able to transfer IRA funds to a charitable remainder trust and give that remainder to charity without tax consequence.
I've tried to find the legislation, but according to Tax Notes the language hasn't been drafted yet. I take it that the transfer to charity would count toward the year's minimum distribution requirements, which would be a big part of the appeal. The provision would apparently expire at the end of this year, so it will be important to get the word out quickly.
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3 comments:
I'm surprised that more attention hasn't been paid to the idea that IRAs, for affluent folks 60 or over, can act as the low-fee equivalent of the gift funds offered by mutual fund companies. The IRA holder can make charitable gifts, tax deductible, whenever she wishes. Funds remaining in the account continue to grow tax-deferred.
I see by the papers that Senators Grassley and Gaucus, head guys at the Finance Committee, have proposed Katrina-related tax relief that would include a waiver of the early-withdrawal penalty for those who wished to tap their IRAs for donations.
The proposal to facilitate the creation of charitable remainder trusts with IRA funds is interesting and would certainly create a new-business opportunity for trust institutions. But I wouldn't want to be a refugee from New Orleans who had to wait until a donor's death for the money needed to rebuild.
The provisions for getting more charitable gifts our of IRAs from the Senate proposal was, so far as I can tell, dropped in the compromise with the House. That was one quick piece of legislation! The Senate already approved it, the House votes on September 20.
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