BUZ LIVINGSTON: Charitable IRA Rollovers - Plan Now

Buz Livingston
Buz Livingston

Outside of jumping the gate at Sanford Stadium, home of my beloved Georgia Bulldogs, I never crashed anyone’s party. 

I certainly had good reason. Georgia was playing Alabama once, Auburn the other time and there was no TV. No comment on the circumstances involving Auburn but my escort overlooked scoring an Alabama ticket, or that was her story until further investigation.

Georgia beat Bama 21-zip so it was all good. Technically speaking I did not crash the Destin Chamber’s After Hours soiree held at Regus Business Suites located in Grand Boulevard. I have an office at Regus so after my late afternoon conference I just hung around with the rest of the Regees.

You can use social settings to promote your business and learn more about how other people work. Ken Hair, Children in Crisis’s CEO, gave me an unexpected bonus, an idea for a column.

Ken knew how charitable IRA rollovers worked and why non-profits should promote them to their donors but he wanted bullet-points so he could forward them to his board. If I’m putting my professional reputation on the line, I might as well get a column out of it.  Non-profits need to promote charitable IRA rollovers and savvy investors can give more efficiently.

Generally speaking at age 70 ½ (or no later than April 1 in the year after turning 70 ½), IRS rules mandate required minimum distributions (RMDs) from traditional IRAs.  The non-profit industry lobbied Congress for a loophole where RMDs sent directly to a charity would not face income tax liability. In 2006, Congress relented.

 Don’t feel embarrassed if you didn’t get the memo; the provision expired in 2007.  Congress fired it up again in 2008 but with a sunset provision in 2009. 2010 and 2011 followed the same path. As part of the fiscal cliff drama, Congress resuscitated charitable IRA rollovers — but only for qualified charitable distributions made before Jan. 1, 2014.

Ken, here are your bullet points. If you are required to take RMDs simply name a 501(c)(3) charity as alternate beneficiary.  Each custodian likely has a different protocol and most will require additional verification either as a signature guarantee or notarization.  

By giving directly from your IRA, as opposed to personally, allows the use of pre-tax dollars versus after-tax. Charitable IRA rollovers are more tax-efficient than itemized deductions; run it by your CPA. Most people don’t itemize and gain no tax advantage for charitable gifts. Charitable IRA rollovers allow a way to give and realize a tax benefit for non-itemizers.

If Congress limits itemized deductions for high earners, charitable IRA rollovers provide donors an alternative where the charity still benefits while maintaining their tax preferences for gifts.

Charitable IRA rollovers have a $100,000 limit and regulations prohibit charitable IRA rollovers to donor advised funds.  While charities are required to acknowledge the gift, the donee cannot claim the rollover as an itemized deduction.  Custodians can impose specific minimum withdrawal amounts or any restriction. Like all charitable donations, donees cannot receive material benefit.  Given the added complexity don’t delay sending paperwork.

It’s never too early to plan; remember charitable IRA rollovers sunset Jan. 1, 2014.

Buz Livingston, CFP, offers hourly financial planning and fee-only investment management to clients along Florida’s Emerald Coast. He can be reached at 267-1068, Buz@LivingstonFinancial.netor www.LivingstonFinancial.net.