Leave Your Legacy to the Michigan Humane Society
Through an IRA Charitable Rollover
Extension of Law Encourages IRA Philanthropy - The Gift with a Bonus

Congress Encourages IRA Gifts by People Over Age 70?

Congress has extended the tax law to permit donors over age 70? to make charitable gifts through their IRAs. The law means IRA owners potentially can increase their contributions to worthwhile causes by 17% to 53% - and have the “bonus” paid for entirely by the tax collector.

The extended law says that people age 70? and older can instruct IRA trustees to make transfers to organizations they support without incurring taxable income on those amounts. Up to $100,000 can be given in this manner, both in 2008 and 2009.

No income tax deductions are available for IRA gifts, but IRA donors can still save significant taxes. In fact, making charitable contributions through your IRA in 2008 and 2009 can enable you to increase the size of your gifts absolutely free.

How does the Extended Law Let Me Increase My Gifts at No Cost?

IRA funds are often heavily taxed when you withdraw them, at rates as high as 35%. What’s more, the tax burden never goes away - even your heirs will pay income tax on IRA funds they receive from your estate, and federal estate taxes may apply as well.

During 2008 and 2009, you have a satisfying alternative: instead of sending all the tax revenue to Washington, D.C., you can divert a portion from your IRA to a worthwhile cause.

Suppose you ordinarily send the Michigan Humane Society a check for $1,000 every year. The table on the next page shows that, instead of writing a check, you could instruct your IRA trustee to send us $1,333 (assuming you are in a 25% tax bracket.) If you had withdrawn $1,333 from your IRA account, the tax would have been $333 in a 25% bracket. That $333 can now be used to advance our lifesaving animal welfare programs, increasing your support by one-third.

IRA Gift Scenarios

Significant Gifts. Phyllis has planned to leave the Michigan Humane Society most of her IRA upon her death, but wishes she could see her gift at work now, during her lifetime. Under the old laws, money removed from an IRA for charitable purposes before death might not have been fully deductible and could create other adverse tax consequences. Now, Phyllis plans to direct a $100,000 gift from her IRA in 2008 and make a similar gift in 2009.

Annual Distribution Gifts. Under the new law, IRA contributions will count toward mandatory annual distributions required of individuals over age 70?. That means IRA gifts can reduce 2008 or 2009 taxes. Robert, for example, must withdraw $20,000 from his IRA this year, even though he doesn’t need the money for living expenses. If Robert wishes, he can direct a $20,000 transfer to MHS prior to taking any distribution and reduce his federal taxes by $5,600 in his 28% tax bracket. Robert intends to follow the same plan in 2009.

IRA Gift Rule Book

• Donors must be over the age of 70? and own a traditional or Roth IRA - other retirement plans such as pensions, 401(k) plans and others are not eligible.
• Only the IRA trustee can transfer gift amounts to a qualified organization. If IRA owners withdraw funds and then contribute them to charity separately, amounts withdrawn will be included in the donor’s gross income.
• No charitable deductions are allowed, but gift amounts will not be included in donors’ incomes.
• IRA gifts may not exceed $100,000 and may be made only in 2008 and 2009. The “ceilings” on contribution deductions (50% of adjusted gross income for cash, 30% of AGI for long-term capital gain property) do not apply to IRA gifts.
• Transfers are not permitted to donor advised funds, private foundations or “supporting organizations.”
• IRA gifts cannot be made to charitable remainder trusts or other “life income gift” arrangements.
• To make an IRA gift, contact the trustee of your account. Please call our office if you have questions about planning any gift, especially gifts through your IRA.

Direct Inquiries to:

Tricia Brosnahan
Major Gifts Officer
Michigan Humane Society
30300 Telegraph Road, Suite 220
Bingham Farms, MI 48025
248-283-1000, ext. 126
tbrosnahan@michiganhumane.org