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For Immediate Release -- Aug 17, 2006
OKLAHOMA CITY, OK -- A federal law was enacted on August 17 allows Individual Retirement Accounts (IRA) owners to share the wealth of their retirement savings by giving directly to charity—without first counting it as income and paying income tax.
The new law could be a boon to Oklahoma City area charitable organizations.
“Many people would love to donate some of their IRA funds to charity and this is an opportunity to possibly avoid taxes and make a gift at the same time,” says Nancy B. Anthony, executive director, Oklahoma City Community Foundation.
Since 1974, Americans have saved billions of pre-tax dollars in IRAs. Thanks to continued savings and investment returns, an estimated $3.6 trillion is currently invested in IRAs, and the total continues to grow. Many retirees have expressed an interest in giving the funds to charity, but income tax must be paid on all withdrawals, which may sharply reduce the value of the gift. Others have asked about designating their children as beneficiaries, but that may draw additional tax consequences.
“For larger estates, a good portion of IRA wealth could go to estate taxes and income taxes of beneficiaries,” Anthony says. Experts estimate heirs will receive less than 25% of most IRA assets that pass through estates.
A provision in the new federal Pension Protection Act of 2006, signed by President Bush today, creates a new option: transferring IRA assets directly to charity. By going directly to charity, the money is not included in the IRA owner’s income and—most importantly—is not taxed, preserving the full amount for charitable purposes thus bypassing the restrictions of the limitation on charitable deductions. The law covers all gifts made in 2006 and 2007.
In 2006 and 2007, holders of traditional and Roth IRAs who are at least 70 ½ years old can make direct charitable transfers up to $100,000 per year. As a qualified public charity, the Oklahoma City Community Foundation can help donors execute the transfers and choose from several charitable fund options for their gift.
“This really is a limited-time offer: the window is open now, but it will close in 2007 unless Congress extends it,” Anthony explains. “For anyone interested in establishing a permanent legacy in their community, this is the opportunity of a lifetime to make the gift of a lifetime. We encourage individuals to discuss this opportunity with their professional advisors.”
While the new law doesn’t apply to donor advised funds, there are several fund options offered through the Oklahoma City Community Foundation that will donors can utilize to transfer IRA assets:
The Fund for Oklahoma City is an unrestricted fund that addresses a broad range of current and future needs and opportunities through strategic grants to charitable organizations. “The Fund for Oklahoma City is a great option for those donors who care deeply for the community and want to ensure current and future needs are met,” says Anthony.
IRA transfers to a Field of Interest Fund allows donors to target gifts to causes important to them such as arts, education, social services and more. Through a Field of Interest Fund, the Oklahoma City Community Foundation awards grants to community organizations and programs addressing the donor’s specific interest area. “If a donor is passionate about a single cause, a Field of Interest Fund provides strategic and lasting support even as needs change,” explains Anthony.
A donor can also choose to transfer IRA assets to a Donor Designated Fund that allows a donor to designate one or more charitable beneficiary organizations at the time the gift is made. After the fund is established, annual gifts are automatically made to the designated charities. Scholarship and award funds can also be designated at the time the gift is made. “With this type of fund, a donor can designate a specific percentage or dollar amount to be distributed to one or more groups,” Anthony adds.
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News Release