IRA Charitable Rollover Reinstatement FAQ

The major tax legislation passed by Congress and signed by President Obama shortly before Christmas reinstated the so-called IRA Charitable Rollover for two years, retroactive to January 1, 2010. The Charitable Rollover (which allows you to make charitable gifts with money held in an individual retirement account or IRA) is a powerful tool, and should be the method of choice for charitable giving for almost everyone who is eligible to take advantage of it.

The Frequently Asked Questions which follow set forth the requirements for IRA Charitable Rollover gifts and answer the most frequent questions we have received about the technique.

Who is eligible to make a tax-free rollover gift from an IRA? Read More []

If you have reached age 70 by the date of your contribution and have an IRA, you can take advantage of this special charitable giving opportunity. (You don't qualify until you are actually 70-1/2, even if you will reach that magic age later in the year.) The money must come out of an IRA as opposed to a 401(k) plan, 403(b) tax-sheltered annuity plan, or any other employer-sponsored retirement plan. The rollover money must pass directly from the IRA trustee to the recipient charity. If you take a distribution and then pay the money over to a charity it won't be treated as a Charitable Rollover or receive the associated benefits.

Who can receive rollover gifts?

IYou may make an IRA Charitable Rollover gift to Case Western Reserve or any other public charity recognized by the Internal Revenue Service. However, the gift may not be used to fund a donor advised fund, supporting organization, or private foundation, nor can it be used to fund a charitable remainder trust or charitable gift annuity. The recipient charity is not allowed to provide any quid pro quo benefits to the donor.

Can I direct how my gift will be used? Read More []

Yes. You can earmark the gift toward a specific use within the university. For example, you can use your rollover contribution to:

  • Make an annual fund gift;
  • Create a special endowment fund to support a particular area of philanthropic interest;
  • Support a particular school or program.

How much can I give?

You may make Charitable Rollover contributions of up to $100,000 per year. In addition, your spouse may also give $100,000 per year, if he or she also has an IRA with sufficient funds. The $100,000 maximums do not carry over from one year to the next, though: if you make no 2010 rollovers, you have only $100,000 available in 2011, not $200,000. (But see the discussion below about making gifts in January, 2011, that will be treated as having been made in 2010.) There is no minimum size for rollover gifts; Case Western Reserve receives many rollover gifts of less than $1,000, usually for annual fund contributions.

What if I have multiple IRAs?

There's nothing wrong with that, and you can pick and choose which IRA(s) to use for rollover contributions. The number and type of IRA has no impact on the $100,000/year limitation. That's a per person limitation, not a per IRA limit.

What are the tax advantages of giving from my IRA? Read More []

There are many:

  • Money withdrawn from an IRA to make a rollover contribution is excluded from your income for federal income tax purposes. The rollover contribution is not deductible, either, but not being taxed on the income is the equivalent of a deduction. In fact, it's better than a deduction because (i) it's available to the two-thirds of federal income tax payers who do not itemize deductions; (ii) it will usually reduce state income taxes, even in states like Ohio which do not allow charitable deductions for state income tax purposes; and (iii) it will avoid or minimize the loss of otherwise allowable deductions that are keyed to a taxpayer's adjusted gross income (for example, the 7-1/2% of adjusted gross income floor for deducting medical expenses).
  • Money withdrawn from an IRA to make a rollover contribution satisfies the required minimum distributions that IRA owners who are more than 70-1/2 must take each year. Planning tip: Be sure to make your charitable rollover contributions early in 2011, before you take your required minimum distributions.
  • If you make the rollover contribution from an IRA that contains contributions that were non-deductible when they went in (and will thus be tax-free when paid out), the rollover money is treated as coming first from the part of the IRA money that would be taxable when paid out to the IRA owner. Over time, this will increase the proportion of distributions to IRA owners or beneficiaries that will be tax-exempt.

How do I direct the Trustee of my IRA to give to the University? Read More []

In our experience, almost all IRA administrators are thoroughly familiar with the charitable rollover process, and can begin the process on the basis of a phone call. If they have questions or need documentation from the university, they should contact our Office of Gift Planning at the number given below.

How long do I have to act?

Unless Congress extends the law, the new rules are effective only for transfers made during 2010 and 2011. You may, however, elect to treat transfers made in January 2011 as 2010 transfers. If you do that, you will be entitled to make additional transfers in 2011 up to the $100,000 per person limit.

We would be pleased to assist you or your advisors in arranging distributions under the new law. Please contact any member of our Office of Gift Planning for additional information. The Office's toll-free number is (877) 477.1143. All inquiries are confidential.