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(Part of a series of articles on charitable giving and the Union County Foundation by David Vollrath - Exec. Dir.) Seldom in our country’s history has there been a year as plagued with natural disasters as has been 2005. From Katrina to Rita the loss of life, property, and a "normal" existence for thousands of families has been nearly incalculable. In response to these unusual catastrophic events our government has legislated a one-time window of opportunity for Americans to donate from existing IRA accounts to charities of their choosing. The intent of this legislation is to provide relief from the terrible consequences of these natural disasters. Here are some of the provisions of this special legislation. In 2005 individuals may gift up to 100% of their income and be allowed a full charitable deduction. When a person over 59 ½ withdraws funds from their IRA the withdrawal will be included in donor’s taxable income but 100% of the funds may be given to charity and be fully deductible. In essence the additional income is cancelled out by the additional deduction. Withdrawals and gifts may also be made from 401(K) plans and other qualified retirement plans. There is no dollar limitation on the size of the gift. A person can withdraw a $1000 or a $1,000,000+. Qualifying gifts must be made between August 28, 2005 and December 31, 2005. Must the IRA gift be used specifically for Katrina relief? The answer is no. The legislation allows gifts to any IRS recognized public charity. This means that a donor can support virtually any of their favorite public charities through this special legislation. Several exceptions apply: no private foundation gifts, no donor advised fund gifts, no supporting organization gifts, and no gifts of property such as stocks or land. Here is an example of how this whole process works. A retired IRA owner, let’s call him Dan, has an annual income of $40,000. Normally Dan would only be allowed to donate up to $20,000 in a tax year and receive a full deduction. Dan is 74 years old and has an IRA that has grown to be worth over $800,000. Dan has decided he wants to make a one-time major gift to his favorite local charity in 2005. Dan withdraws $50,000 from his IRA making his income now $90,000 for the year. Dan makes a $50,000 gift to his favorite charity and deducts the $50,000. Dan’s income for tax purposes is reduced to the original $40,000 level. The special legislation has allowed Dan to make a significant one-time gift to charity from his ample tax deferred retirement account without the usual negative income tax consequences. This legislation provides a truly unique opportunity to make a positive difference in our world. As is always the case we recommended a donor should work closely with their professional advisor(s) on such issues. The Union County Foundation encourages you to consider your present and future charitable goals. The Foundation is equipped to help you achieve these goals by providing: planned giving and estate planning resource information, charitable gift annuities/life income plans, charitable remainder trusts, and a broad array of other philanthropic vehicles. Please call us at 937-642-9618, email commfounduc@imetweb.net, reference our website at www.emarysville.com/unioncountyfoundation, or stop by our Marysville office at 126 N. Main St. We are committed to helping you.... “preserve your footprint in time.” |
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