New fact sheet for estate planners, tax advisors and their clients
October 10, 2006
Courtesy of Grand Traverse Regional Land Conservancy (www.gtrlc.org)

August 2006 Federal Tax Code Changes Explained
For a short time, you or your clients can make gifts of a lifetime.

Congress approved the Pension Protection Act of 2006 that, among other provisions, includes bold incentives for donations of IRA funds until December 31, 2007. On August 17, the President signed these changes into law.

IRS Charitable Distributions
Give More for Less: For 2006 and 2007 only, Americans over age 70½ will no longer pay federal income tax on individual retirement account (IRA) funds, if they are given directly to qualified charities – up to $100,000 per person, per year.

How it works: Retroactive to January 1, 2006 and by December 31, 2006, you can make a gift of up to $100,000 by transferring IRA assets directly to the chosen charity. Between January 1 and December 31, 2007, you may transfer an additional $100,000. You will not receive an additional charitable deduction because the distribution is not taxable.

Some Restrictions Apply. Such transfers cannot be used for donor-advised funds or private foundations. You can use these funds to establish a permanent endowment to benefit the charity of your choice.

Is this Right for Me? If you answer “yes” to any of the following questions, you may want to consider taking advantage of this short-term opportunity. Please consult estate planning professionals and your tax advisors.

• Are you older than 70 1/2 and are you planning to leave a charitable legacy through your estate plan?
• Have you designated your favorite charity as beneficiary of retirement assets?
• Do your retirement savings exceed your expected needs?
• Are you subject to a charitable deduction limitation because you give more than 50 percent of your income to charity?
• Do you take the minimum distributions from your IRA only because you must?
• Do taking greater distributions from your retirement plans affect the amount of your Social Security benefits that are taxed?
• Do you have adjusted gross income above $150,500 ($75,250 for married filing separately), which causes a phase-out of itemized deductions and exemptions?

Want to learn more?
For more information about the IRA Charitable Deduction, contact your estate planning professional, tax advisor or Council on Foundations, www.cof.org.