By Frank Brown
Part of the Emergency Economic Stabilization Act signed into law on October 3rd included the extension of the ability to donate directly from a Traditional IRA to a charitable organization without the distribution being considered as income. The donor must be at least 70 1/2 years old and there is a $100,000 maximum limit per year for 2008 and 2009. The donation must be made by December 31.
This plan can provide big tax savings for some donors depending on their income tax situation. Many generous retirees do not have enough current income to cover their donations with a full tax deduction which is limited to 50% of Adjusted Gross Income. They may even have charitable carry-forward from the previous year’s gifting. Even with sufficient income to deduct all of their giving, there can still be tax advantages to a direct donation from an IRA.
An IRA direct donation to a Giving Fund (aka Donor Advised Fund) at the Servant Christian Foundation is excluded in the legislation. However, SCCF has access to a tool which can be used somewhat like a Giving Fund, called a Designated Gift Fund. Designated Funds can only make distributions to a single charity. Donors wishing to use IRA donations can give to multiple ministries by setting up a separate Designated Fund for each. One of the advantages to this is that after the Designated donation is made, the funds can be distributed in phases over a period of years. It doesn’t have to be sent to the ministry at once or as a lump sum. You can fund your giving ahead.
The Next Step
So, now that I qualify and my IRA qualifies, how do I do this?
- Contact your IRA custodian. The custodian will make the check payable directly to Servant Christian Community Foundation.
- Establish your designated fund(s) with SCCF indicating the recipient charity(s).
- Obtain a written receipt from SCCF.
- Work with your accountant to determine the exclusion on your tax return and any net taxable income amount which will need to be included on your 1040.
- SCCF will distribute the funds in accordance with your desires.
For more information, contact the SCCF office at (913) 310-0279 or via email.
Frank Brown is a founding board member of Servant Christian Community Foundation, and he served as a pilot for TWA for 25 years. He is currently the Chairman of Via Bancourier. He has been active in Christian ministries for 30 years.