Direct IRA Transfers for U.S. Community Foundations

Local Release

  Contact: George P. Ferrari, Jr., Executive Director

For Immediate Release   272-9333 or gferrari@communityfoundationoftc.org

New Pension Law Also Provides for Charity

Provision Allows for Tax-free Charitable Transfers from IRAs

ITHACA , NY (August 18) – Since 1974, millions of Americans have saved billions of pre-tax dollars in Individual Retirement Accounts (IRAs). Thanks to continued savings and investment returns, an estimated $3.6 trillion is currently invested in IRAs, and the total continues to grow. Yesterday, a federal law was enacted allowing 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 is an important opportunity to combine personal tax planning benefits with community philanthropy impact. The Community Foundation of Tompkins County is skilled at assisting individuals and their professional advisors with many methods of achieving their personal goals in light of this new legislation.

“This is a wonderful win-win-win—for people seeking to support the community through charitable contributions, reduce their taxes, and engage the effectiveness and efficiencies of a community foundation,” said George P. Ferrari, Jr., Executive Director of the Community Foundation of Tompkins County.

Thanks to decades of deliberate saving and favorable investment returns a substantial share of today's retirees have more money in their IRAs than they'll ever need. Many have expressed an interest in giving the funds to charity, but income tax must be paid on all withdrawals, which sharply reduces 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 is often lost to estate taxes and income taxes of beneficiaries,” Ferrari said. “When an IRA is subject to both estate and income taxes, heirs end up with less than 25% of the initial IRA balance.”

A provision in the new federal Pension Protection Act of 2006, signed by President Bush yesterday, creates a new option: transferring IRA assets directly to a public charity such as the Community Foundation of Tompkins County. 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. The law covers all gifts made this year and next.

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, Community Foundation of Tompkins County can help donors execute the transfers and choose from several charitable fund options for their gift. Donor Advised Funds do not qualify for tax-free IRA transfers. The amount transferred counts towards the taxpayer's required minimum distribution, and because the transfer does not count as income, high-income taxpayers may be less likely to see their itemized deductions and personal exemptions phased out, and may have a smaller Alternative Minimum Tax burden.

“This really is a limited-time offer: the window is open now for those who are 70 ½, but it will close in 2007 unless Congress extends it,” said Ferrari. “For anyone interested in establishing a permanent legacy in this community, this is the opportunity of a lifetime to make the gift of a lifetime.”

SIDEBAR

Gift of a Lifetime: Shopping for Charity

Having more retirement money than you need is a great problem to have, and one that's now easier to solve. But generous IRA donors still face multiple options for their gift: Support the entire community? Underwrite a special cause? Support a favorite charity? Here are three top charitable fund picks of George P. Ferrari, Jr., Executive Director of the Community Foundation of Tompkins County.

Community Fund: Meeting ever-changing community needs.

IRA transfers to the Community Foundation of Tompkins County's Community Fund address a broad range of current and future needs. We evaluate all aspects of community well-being—arts and culture, community development, education, environment, health and human services—and award strategic grants as investment in select projects and programs.

Ferrari: “For people who care deeply about this community and its people, this fund is an excellent way to address our most pressing needs, today and tomorrow.”

Field of Interest Funds: Connecting personal values to high-impact opportunities.

IRA transfers to Community Foundation's Field of Interest Funds allow donors to target gifts to causes important to them: arts, health services, education, neighborhood revitalization, youth welfare, and more. Community Foundation of Tompkins County awards grants to community organizations and programs addressing the donor's specific interest area.

Ferrari: “For those who are particularly passionate about a single cause, Field of Interest Funds provide strategic, lasting support—even as needs change over time. We serve the community with Field of Interest Funds including the Women's Fund, Arts and Culture, Children and Youth, Environment and Sustainability, Education, Health and Human Services, and Community Building ”

Designated Funds: Helping local organizations sustain and grow.

IRA transfers to the Community Foundation's Designated Funds allow donors to support the good work of a specific nonprofit organization—a senior center, museum, or any qualifying nonprofit charitable organization.

Ferrari: “For people who want to help secure the future of their favorite charities, our Designated Funds give nonprofits a steady stream of income, plus planned giving and investment management services.”

Sources:

Council on Foundations at http://www.cof.org/Action/content.cfm?ItemNumber=5275&navItemNumber=5276

and

George P. Ferrari, Jr., Executive Director, Community Foundation of Tompkins County

272-9333     gferrari@communityfoundationoftc.org

IRA MARKET SHARES BY HOLDER, 2001-2005

($ billions, end of year)

Since its inception in 2000 the Community Foundation has facilitated more than $1,260,000 in investments in the Tompkins County community from 408 individual grants.  Information about the mission and operations of the Community Foundation, and guidance regarding how to invest in the community as a Foundation donor, is available at www.communityfoundationoftc.org .

Interview Contact: George P. Ferrari, Jr.
Telephone: 607-272-9333
gferrari@communityfoundationoftc.org
http://www. communityfoundationoftc.org

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