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New Opportunity to Use Retirement Plan Assets for Charity

August 15, 2006

On August 17th the President signed the Pension Protection Act of 2006 into law. It primarily addresses pension fund issues, but also includes a number of items related to charitable giving.

WE WANT TO HIGHLIGHT ONE PROVISION OF THIS LAW THAT PROVIDES A UNIQUE OPPORTUNITY TO USE RETIREMENT PLAN ASSETS TO MAKE A SIGNIFICANT GIFT TO A CHARITABLE ORGANIZATION OR CAUSE THAT IS IMPORTANT TO YOU.

Specifically, the new law permits people who have reached age 70.5 to exclude from income up to $100,000 per year in retirement plan assets if contributed to a qualifying charity. These IRA charitable rollovers will be allowed in 2006 and 2007 only, and the gifts must be made from an IRA account.

Under this legislation, rollover contributions may be made to field-of-interest funds and unrestricted funds in the Long Island Community Foundation. The provision does not give a charitable deduction, but benefits the donor by excluding what otherwise would be taxable income. Because income tax deductions phase out at certain levels of income, the exclusion from income is more valuable to many prospective donors.

As of now, donor-advised funds, supporting organizations, and private foundations are not eligible charitable beneficiaries for IRA rollovers.

The new law makes no change to the rules that govern charitable bequests of IRA assets, either outright to charities or to deferred giving arrangements. Such transactions have qualified for favorable income tax consequences in the past and will continue to be an attractive planning strategy in the future. The new law only changes the rules for lifetime charitable gifts from IRAs.

If you would like to learn more about how you can take advantage of the charitable IRA rollover, please feel free to contact Hazel Weiser, Director of Foundation Advancement, at 516.681.5085, ext. 226 or hweiser@licf.org. We will continue to keep you posted on any other aspects of this legislation that may be relevant to your charitable giving.