Q+A Give from your IRA

An estate planning expert explains the charitable IRA rollover

The charitable IRA rollover, which allowed taxpayers 70½ or older to make tax-free distributions directly from their IRA to charitable organizations, remained expired this fall but was in a bill headed for the Senate. Although a vote was not expected until after the November elections, vote watchers believed the provision would be reenacted retroactively to January 1, 2014, and extended for 2014 and 2015.

Barbara S. Hughes, AB’64, AM’68, partner at Hill, Glowacki, Jaeger & Hughes, who focuses on estate planning and elder law, advises clients to be aware of the potential revival.

What is the charitable IRA rollover?

In 2006 a federal provision allowed individuals to contribute up to $100,000 from an IRA directly to a qualified charitable organization without incurring federal income tax. The provision was extended several times, only to expire again December 31, 2013.

Who is it for?

The provision is useful for individuals 70½ or older who must take minimum IRA distributions but do not need the additional income, those who wish to make charitable gifts in excess of 50 percent of their adjusted gross income (AGI), nonitemizers, individuals in states that do not allow charitable deductions, and anyone who has considered using IRA assets to make a gift to the University. The direct rollover reduces income “above the line”: the distribution is not included in AGI, preventing that amount from affecting calculations (including the 3.8 percent surtax) based upon AGI.

How is the transfer made?

To ensure a direct transfer, we recommend you contact your plan administrators and follow their procedure to execute an IRA charitable rollover. Usually administrators and custodians need directions early in December to process the request before year-end. The Office of Gift Planning can provide you with a sample letter to send your provider to initiate the rollover gift.

What should donors do now to prepare?

Prepare to take steps as if the provision were in effect. If the rollover provision is revived retroactive for 2014, then the amount distributed from the IRA to the charity should qualify. If the provision is not revived, the IRA distribution would still qualify as an itemizable charitable contribution deduction on the taxpayer’s 1040 Schedule A.