Because such a large share of wealth is held in retirement plan assets
Because retirement plan assets left at death to non-charities can be heavily taxed, making bequests to charities relatively inexpensive
Because current gifts from IRAs are particularly attractive for living donors under age 60
Because donors over 70½ must make withdraws from standard IRAs even if they don’t need the money, potentially opening up the possibility for charitable giving
Because Roth conversions may cause large spikes in income that donors will want to offset with charitable, or other, deductions
49 ½ and 70 ½
59 ½ and 69 ½
59 ½ and 70 ½
70 ½ and 79 ½
55 ½ and 70 ½
If the donor is not yet itemizing deductions, the donor will not receive the full value of the resulting charitable deduction due to the loss of the standard deduction
If the donor has already made charitable gifts beyond the income giving limitations, the donor will not receive the full value of the resulting charitable deduction in the current year
If the donor is under age 59 ½, withdrawals from the IRA will generate a 10% penalty that will not be offset by the charitable deduction
Because the withdrawal will count as income to the donor, the donor’s increased income level may disqualify him or her for other tax deductions that are phased out at specified income levels.
In certain years Congress has allowed those over age 70 ½ to make qualified charitable distributions (QCD), and donors using these provisions may lose the value of the deduction due to increased levels of reported income and/or loss of the standard deduction
Because such withdraws generate at 10% penalty
Because withdraws count as taxable income to the participant
Because taking a charitable deduction requires itemization
Because there are limits on the amount of deductible charitable gifts that a person can make each year
Because required minimum distributions do not start until age 70 ½
The principal of the IRA become fully taxable
The taxpayer is taxed on the value of the Required Minimum Distribution, regardless of whether he actually withdraws it or not
The IRS charges a 50% penalty for the amount that should have been withdrawn but was not
The IRS charges a 10% penalty for not withdrawing, mirroring the 10% penalty charged for withdraws before age 59 ½
A transfer from a 401(k), 403(b), pension, or profit sharing plan
A transfer from an IRA by a person aged 65
A transfer from an IRA to a private foundation
A transfer of $100,000 to a public charity from an IRA
A transfer from an IRA to a charitable remainder trust of $50,000 by a person aged 74
Withdrawing $10,000 of direct contributions made to a Roth IRA and giving the money to a public charity
Transferring $10,000 directly from an IRA to a public charity through a Qualified Charitable Distribution in a year in which such transactions were permitted
Withdrawing $10,000 from an IRA and giving the money to a public charity when the donor was age 50.
Withdrawing $10,000 from an IRA and giving the money to a public charity when the donor was age 65.
Withdrawing $10,000 from an IRA and giving the money to a public charity when the donor was age 75 and the $10,000 was a required minimum distribution.
Retirement plan assets receive no step-up in basis if given to non-charitable beneficiaries
Retirement plan assets are subject to both gift and estate taxes if given to non-charitable beneficiaries
Retirement plan assets are subject to both income taxes and estate taxes if given to non-charitable beneficiaries
Retirement plan assets accumulate tax free, making them a larger part of the overall estate
Retirement plan assets are more difficult to sell in the subsequent estate administration if given to non-charitable beneficiaries
100% of a $1,000,000 IRA to a public charity
100% of a $1,000,000 IRA to a private foundation
100% of a $1,000,000 IRA to a private foundation managed by my surviving children and grandchildren
100% of a $1,000,000 IRA to the decedent’s estate where his will directs that $1,000,000 shall be paid to a public charity
100% of a $1,000,000 IRA to a public charity’s donor advised fund with the decedent’s daughter as the named advisor
John’s estate will receive a charitable estate tax deduction
John’s estate will receive a charitable income tax deduction to offset the income taxes associated with an IRD asset
John’s estate will receive both a charitable estate tax deduction and avoid paying income taxes from the IRD asset
The charity will receive more money than if he had engaged in lifetime giving
There are no tax advantages
Because it is impossible to name more than one death beneficiary on a 401(k) account
Because beneficiaries must share equally, it is not possible to list Texas Tech University as a 10% beneficiary
Because the spouse, if she survives, must be the sole beneficiary of a 401(k) account
Because if Mary splits the 401(k) with someone else, the transfer will no longer qualify for the marital deduction
Because Mary must give her permission for Texas Tech University to be named as a death beneficiary and she hates the school
Leaving the IRA directly to Mary will generate no estate tax at John’s death, but leaving money to the charitable remainder trust will.
Leaving the IRA directly to Mary qualifies for a marital deduction, but leaving the IRA to the charitable remainder trust will not.
Leaving the IRA directly to Mary will generate no estate tax at Mary’s death, but leaving the IRA to the charitable remainder trust may.
Leaving the IRA directly to Mary will allow her to use as much of the money as she desires, but leaving the IRA to the charitable remainder trust limits her to a fixed dollar (CRAT) or percentage (CRUT) amount of the trust.
Leaving the IRA directly to Mary will create ordinary income whenever she takes a withdrawal, but leaving the IRA to the charitable remainder trust will not create ordinary income for Mary.
List the child as the beneficiary of the IRA and verbally inform the child of the intended plan that the remainder should go to charity after ten years.
List the estate as the beneficiary and write in the will that $1,000,000 from the estate should be placed into a charitable remainder trust with payments to the child for ten years, remainder to the charity.
List a charitable lead trust as the beneficiary with charity payments made substantially all at the end of the ten year trust term due to “shark fin” management of underlying assets postponing income until the end.
List a charitable remainder trust as the beneficiary of the IRA with payments to the child for ten years, remainder to the charity.
List a donor advised fund as the beneficiary with the child named as the advisor to direct contributions, allowing the child to name nonprofit charities that offer to directly benefit the child.
With an IRA, the donor has the freedom to change his or her mind and later decide not to leave the funds in the IRA to any charity
With an IRA, the donor may take any amount of money in the account out (subject to taxes and penalties) at any time and is not limited to fixed dollar or fixed percentage payouts
With an IRA, the donor receives a 100% tax deduction for all funds placed into the IRA, whereas the Charitable Remainder Trust provides a deduction for only the share of funds representing the present value of the charity’s projected remainder interest
With an IRA, the donor incurs almost no administration costs, whereas with a Charitable Remainder Trust there are significant ongoing administration costs, including the requirement to annually file a tax return on behalf of the Charitable Remainder Trust
Over time, the donor can place more money into the IRA than into a Charitable Remainder Trust
By giving a remainder interest in a home or farmland to charity, the taxpayer can generate a significant deduction to offset the taxable income created by the Roth conversion even without having cash available to make a direct charitable gift
By use of a charitable lead trust, the donor can take an immediate deduction for his next ten years worth of charitable giving (assuming sufficient assets are shifted into the CLT to fund the future charitable contributions), helping to immediately offset the taxable income created by the Roth conversion
By naming a charitable organization as the death beneficiary of the new Roth IRA resulting from the Roth conversion, the donor can avoid the income taxes that would have to be paid at death by his or her heirs due to these assets being considered Income in Respect of a Decedent (IRD)
For a donor who has given in excess of the income giving limitations and has carryover charitable deductions that are about to expire, a Roth conversion can generate the taxable income needed to claim these deductions by allowing the donor to pay taxes in advance on future withdrawals from the retirement account.
By use of a donor advised fund, the donor can take an immediate deduction for future charitable grants by placing money into the donor advised fund that will, in the future, be paid out to other charities, helping to offset the taxable income created by the Roth conversion
Gifts and Deductions
Income and Deductions
Income taxes and Estate taxes
IRD and Charitable Deductions
Taxes and Retirement Withdrawals