IRA Charitable Rollover Made Permanent

On Friday, Congress permanently allowed donors to make qualifying distributions to charities from their IRA while still alive.

Donors with an IRA can make a Qualified Charitable Distribution (QCD) directly from their IRA to the charity.  The law permits any QCD actually made during 2015 to qualify.  A few donors did complete their QCDs during 2015 in the hope the law would be extended and made retroactive (which it was).

The basic rules for a Qualified Charitable Distribution are:

    • The donor must be age 70 1/2 on or before the date of the rollover;
    • Donors may transfer up to $100,000 per donor each tax year;
    • The charity must be a public charity but not a donor-advised fund or supporting organization;
    • The distribution must be a direct IRA-to-charity transfer;
    • The entire distribution must qualify as a deductible contribution were it not for this provision;
    • Rollovers from SEPs and SIMPLEs do not qualify;
    • The entire QCD reduces the IRA owner’s required minimum distribution for the year; and
    • The exclusion from gross income only applies to distribution amounts that would be includible in gross income were it not for this provision.

Please remember that although a Donor-Advised Fund cannot receive a Qualified Charitable Distribution, a Restricted Fund, Designated Fund and a Field of Interest Fund can receive a QCD.  The key with these latter options is that once the gift to charity is made, the donor can no longer be involved in the investment and charitable grant recommendations.  A donor who wishes to voice input on how the money is spent for charitable purposes will need to determine which charity or charities he or she wants to support as well as the timing of the grant payments, before the QCD is completed.  Those decisions must be documented in a written agreement between the donor and the charity.

Donors who haven’t yet taken their Required Minimum Distribution (RMD) for 2015 can instruct their IRA Custodian to transfer up to $100,000 to an eligible charity by December 31, 2015.  Most clients have already taken their RMD for 2015 but even for these clients, they can still choose to instruct their IRA Custodian to transfer up to $100,000 to an eligible charity by December 31, 2015.

Contact us to find answers to any of your other charitable planning questions.

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