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Copy of Project Angel Food > Donate > Planning Gift  

PLEASE NOTE: This summary was prepared as an educational service to its clients and others and is not intended as legal or tax advice. Consult your own legal or tax advisor before making any decision based on this information.

New! Charitable IRA Rollover!

If you are age 70 ½ or older, new legislation now allows you to make cash gifts totaling up to $100,000 a year from your traditional or Roth IRA to qualified charities without incurring income tax on the withdrawal.  This is good news for people who want to make a charitable gift during their lifetime from their retirement assets, but have been discouraged from doing so because of the income tax penalty. The provision is effective for tax years 2007 and 2008 only, so you must act by December 31 to take full advantage. Contact us for more information.

Charitable IRA Rollover Provision

On August 17, President Bush signed H.R. 4, the Pension Protection Act of 2006, into law.  This bill contains a two-year IRA Charitable Rollover provision that allows people age 70 ½ or older to exclude up to $100,000 from their gross income in tax years 2007 and 2008 for cash gifts made directly to a qualified charity.

The new provision permits distributions from traditional IRAs or Roth IRAs to qualified public charities and private operating foundations as described in IRC 170 (b)(1)(A). Whereas such distributions were previously income taxable, they are now excludable from gross income, eliminating the income tax penalty for such charitable gifts. The following limitations and restrictions apply:

  • The individual for whose benefit the plan is maintained must have attained the age of 70 ½ or older at the time of gift.
  • Qualified charitable distributions may not exceed $100,000 in the aggregate in any taxable year.
  • The provision applies to tax years 2007 and 2008 only. Qualified distributions must be made by December 31 of each year.
  • Qualified distributions must be made directly to the charity by the plan trustee. Contact your plan trustee for information on how to initiate a transfer.
  • Qualified charitable distributions may be excluded from gross income for Federal Income tax purposes. However, no federal income tax deduction is available. Certain states may not exclude gift amounts withdrawn from an IRA for state income tax purposes.
  • Only outright gifts are eligible. Distributions to charitable gift annuities, charitable remainder trusts, pooled income funds and other split-interest arrangements do not qualify for special tax treatment.
  • Qualified contributions may be counted toward the Minimum Required Distribution (MRD) for a donor’s IRA accounts.
  • Qualified contributions are not subject to the deductibility ceiling (50% of AGI) or the 2% rule that requires that itemized deductions be reduced by 2% of AGI in excess of $150,500 for tax year 2007.
  • Gifts from retirement accounts other than IRAs—such as 401k, 403b, and SEP accounts—are not eligible. Donors may be able to make qualified transfers of money from other accounts to their IRA, and then make a charitable gift from their IRA. Check with your tax adviser.
  • Distributions to Supporting Organizations as described in IRC 503(a)(3) and Donor Advised Funds as described in IRC 4966(d)(2) are specifically excluded.
  • Donors who do not itemize their Federal income tax returns may make qualified IRA gifts and exclude such gifts from their reportable income.

Who is most likely to benefit?

  • Individuals who take mandatory minimum withdrawals, but don’t need additional income.
  • Individuals who wish to give more than the deductibility ceiling (50% of AGI).
  • Individuals who are subject to the 2% rule that reduces their itemized deductions.
  • Individuals whose major assets reside in their IRAs and who wish to make a charitable gift during their lifetime.
  • Individuals who intend to leave the balance of their IRA to charity at death anyway.

Tips:

1. There is a powerful way to pass assets to your heirs at a significantly reduced gift and estate tax cost, and provide years of income to Project Angel Food.

It's called a charitable lead trust, and if estate preservation is a planning priority for you it is definitely worth looking into.

How does it work? You transfer appreciating assets into the lead trust; the trust pays Project Angel Food income for a term of years; at the end of the term the balance of the lead trust passes to your heirs. Gift/estate tax on the transfer is reduced by the value of our income interest. The trust can even be set up to reduce your gift or estate tax liability to zero.

Best of all, your heirs pay nothing in capital gains tax on any appreciation in the assets that occurs during the term of the lead trust.

2. A "hidden asset" can make you a significant donor to Project Angel Food.

If you are maintaining life insurance coverage that your family no longer needs, consider giving the (paid-up) policy to us. You'll receive an immediate charitable deduction and deliver a substantial gift to Project Angel Food, without affecting your investment portfolio or cash flow.

3.  Did you know you can lock in the gains of your appreciated securities and receive income (based on their present value) for the rest of your life?

In exchange for your gift of appreciated stock, you can receive:

  • Guaranteed annuity payments for life (one or two beneficiaries);
  • High rates of return;
  • A current income tax deduction;
  • Capital gains tax savings on the stock you donate;
  • Tax-advantaged income (part ordinary, part capital gains and part tax-free);
  • A choice of immediate, deferred or flexible payments; and
  • The satisfaction of supporting Project Angel Food.

4. If you want maximum flexibility and maximum effectiveness in your giving, consider a Charitable Remainder Unitrust benefiting Project Angel Food.

Unitrusts offer you more planning options than any other life-income gift:

  • The unitrust can grow tax-free until an event that you choose (retirement; the sale of a trust asset) begins income payments;
  • The unitrust can pay income to more than one beneficiary;
  • It can pay income for a term of years instead of lifetime — to help grandchildren with tuition costs, for instance;
  • It can hold a temporarily illiquid asset, such as closely-held stock or commercial real estate;
  • You can choose the trustees of your unitrust.

5. You don't have to tap your nest-egg to build our nest-egg

Use life insurance to create an endowment from your income rather than your capital. Affordable premiums build coverage that will deliver a significant gift to us. Leverage modest annual gifts into the equivalent of a substantial bequest or trust distribution.

Make us the irrevocable owner of the policy and receive a charitable deduction for your gifts covering our premium payments. We'll work with you on this and other details that maximize the benefits of using life insurance to make your gift.

6. Thinking about leaving your IRA to your heirs? You may want to think again.

The balance remaining in your retirement plan after your death is subject not only to federal estate tax, but also to income tax – and, if you name a grandchild as beneficiary, to the generation-skipping tax. The result can be that only 20 to 25 cents on the dollar may be left for your family.

Why give so much of your hard-earned retirement assets to the government when you can give them to Project Angel Food?

Direct the balance of your plan to Project Angel Food, and use other assets – not subject to all the taxes applied to retirement assets – to make gifts to your family.

Recent IRS regulations make it easier to make Project Angel Food a beneficiary. 

For more information about tax deductions and other methods of donation:

Project Angel Food
922 Vine Street
Los Angeles, CA 90038
Phone: 323.845.1800
Fax: 323.845.1818

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