Effective Estate Planning
Take advantage of new law that makes giving easier

By Donna Esposito, Special to The Catholic Sun
September 21, 2006

Some good news from this summer: President Bush signed into law the Pension Protection Act of 2006. For years 2006 and 2007, qualified donors (IRA owners over age 70 1/2) will be allowed to withdraw up to $100,000 from their individual retirement accounts tax-free if they give the money directly to charity.

This legislation is designed to stimulate charitable giving and is potentially the most favorable charitable legislation in recent years. These incentives open up the possibility for increased charitable giving from IRAs.

And donors at the Catholic Community Foundation are taking advantage of it.

Take Martha for example. She is retired and volunteers at her parish. Over the years, Martha’s IRA has grown substantially. Since she has all the income she currently needs, Martha decided to make a gift of $2,000 from her IRA to the Catholic Community Foundation for its work in providing tuition assistance to diocesan elementary schools. Martha called her custodian last month and requested a transfer of part of her minimum distribution amount. It was easy for Martha to make the gift and she liked the fact that she could help without increasing her taxes.*

The IRA rollover gift is a simple and easy way to provide for your favorite charity, without increasing your taxable income. As long as the IRA distribution is made directly to public charities (but not to private foundations, supporting organizations or donor advised funds), there will be no amount included in taxable income, and no income tax deduction.

Qualified charitable transfers must come only from IRAs (not 401(k), 403(b), SEP-IRA or Simple IRA plans). For some donors, it may be possible to establish an IRA and then rollover assets from another plan to the IRA. This IRA may then be used to make qualified charitable gifts.

With an IRA rollover to charity, there will be a simpler tax return and potential favorable tax benefits due to a lower adjusted gross income. The IRA charitable rollover will also fulfill part of, or the entire, required minimum distribution requirement.

Potential IRA donors include:

-- The convenience donor who wants an easy way to make a gift;

-- The standard deduction donor who currently receives no tax benefit from his or her charitable gifts;

-- The category donor who could stay in the 50 percent Social Security taxable category as opposed to the 85 percent taxable level by transferring his or her required distribution to charity;

-- The major donor who wants to give $100,000 to charity and avoid complexity by not increasing AGI by $100,000;

-- The generous donor who would like to give over and above the normal 50 percent deduction level; or

-- The charity beneficiary donor whose IRA has a charity beneficiary and would prefer to give the charity the IRA during his or her life rather than at death.

The Catholic Community Foundation is helping all these by being a channel for donors to give to their parishes, schools and various ministries throughout the Diocese of Phoenix. Simply call Tom Thieken, director of planned giving for the Catholic Community Foundation, at (602) 354-2401 or at tthieken@ccfphx.org.

Donna M. Esposito specializes in individual and estate taxation. She has a Masters degree from Arizona State University and is a Managing Director for RSM McGladrey. She also serves on the estate planning committee of the Catholic Community Foundation.

The Catholic Community Foundation was founded in 1983 and is a 501(c)3 non-profit organization dedicated “to carry on the work of Christ by fostering philanthropy.” The foundation provides permanent endowment and memorial funds for donors interested in furthering Catholic education, communication and Christian formation in the Diocese of Phoenix. The foundation specializes in endowment and grant fund management, as well as estate planning for the Catholic community.

Additional information on IRA gifts can be found at the Catholic Community Foundation’s Web site, www.ccfphx.org, under “Planned Giving,” then “Donor Stories.”