Rescue Bill Provides for Gifts from IRAs Direct to Charities

October 08, 2008

The recently passed Emergency Economic Stabilization Act of 2008 (or "Rescue Bill") contains numerous tax breaks and benefits to individuals and businesses, including one that may be of special importance to those over the age of 70-1/2 who own IRAs and who wish to make charitable gifts before year end.

The Rescue Bill extends an exclusion of up to $100,000 from gross income for withdrawals from Individual Retirement Accounts (or IRAs) that pass directly to certain charities. You may remember a similar provision that expired at the end of 2007. The Rescue Bill extends that same tax benefit for the years 2008 and 2009.

Under this exclusion, a person who is over the age of 70-1/2 at the time the distribution is made may direct the trustee, or custodian, of his or her IRA to make a transfer of up to $100,000 from IRA account, provided that the transfer passes directly to a qualified charity. This exclusion could provide a significant opportunity for IRA owners over the age of 70-1/2 to make substantial charitable gifts before year-end 2008, and again in 2009. 

In particular, the Bill provides:

• The distribution of any amount up to $100,000 from an IRA account will not be included in the taxpayer's gross income for income tax purposes in the year made.
• For married couples, each spouse may make a charitable distribution from his or her IRA account of up to $100,000.
• The distribution to charity is not included in gross income for income tax purposes, and there is no offsetting charitable deduction for the gift. 
• Any gift must pass to a charity described in IRC Code Section 170(b)(1)(A). Any gift to a private foundation, a donor advised fund, or a supporting organization will not qualify for this exclusion.  You should consult with your tax advisor and with the receiving charity to insure that your gift will pass to a qualified organization.
• Any such qualified distribution to a charity will count toward your required minimum distribution from the IRA in the year the gift is made. 

This is an opportunity for persons over the age of 70-1/2 to make gifts from their IRAs to favorite charities in 2008 and 2009, but there are requirements that must be met to qualify the gift for exclusion from income tax.  Be sure to check with the receiving charity and with your income tax advisor to make sure these requirements are met.

To discuss these issues, or any other estate planning concern you may have, please contact your Farella Braun + Martel Family Wealth attorney.

Fred Caspersen / 415-954-4427 / fcaspersen@fbm.com
Lara Gilman / 415-954-4913 / lgilman@fbm.com
Kate Ohlandt / 707-967-4156 / kohlandt@fbm.com     
Mike Korbholz / 415-954-4956 / mkorbholz@fbm.com    
Kevin Rodriguez / 415-954-4979 / krodriguez@fbm.com    
Kristine Waggener / 415-954-4972 / kwaggener@fbm.com