Planned Giving Strategies

You Can Make Great Use of Your Full IRA Distribution

(And You’ll be Keeping the IRS from Taking Any Of It !)

by Stephen Brier, October 2018

The tax legislation enacted by Congress in December 2017 will make it impossible for many people to benefit from income tax charitable deductions. This is because people claiming the standard deduction for 2018 will not reduce their tax bill by claiming charitable deductions or other itemized deductions. However, if you are older than 70-1/2 and have an IRA, you can save a lot of money by using your IRA to do your charitable giving in 2018.

For people older than 70-1/2, a direct transfer of funds from an IRA to North Tillamook Library Friends and other public charities eliminates taxable income and satisfies your required minimum distribution. This “IRA rollover” strategy almost always is better than a tax deduction and it benefits people who claim the standard deduction as well as people who claim itemized deductions.

An IRA rollover always has been a good strategy for people forced to take required minimum distributions. In 2018, this strategy should be at the top of everyone’s list if you want to make charitable gifts. Everyone older than 70-1/2 can contribute up to $100,000 (aggregate) to charities from their IRAs in 2018. To do this, you simply instruct your IRA custodian to send checks directly to your charities of choice.

If you would like more information, please contact Steve Brier, Co-Chair of the North Tillamook Library Friends Membership and Development Committee, at 503.349.5500 or ssbrier@gmail.com. All inquiries are strictly confidential.

The information above is general in nature and is not tax advice or legal advice. Please contact your attorney or financial advisor for advice specific to your circumstances.

New Tax Law is Good for the Charitably Minded

 Despite rumors to the contrary, the charitable deduction was the only widely-used tax deduction that was not limited under the tax legislation enacted by Congress in December 2017 according to Steve Brier, a board member of North Tillamook Library Friends and an expert in charitable giving.

As Steve notes: In some respects, the tax benefits of charitable giving were expanded. For example, the annual limitation on deductibility of cash gifts was increased from 50% of adjusted gross income to 60% of adjusted gross income.  Also, the new law repealed a provision that in the past caused high-income taxpayers to lose up to 80% of the value of their deductions.

The new law increased the standard deduction to $12,000 per person  — $24,000 for a married couple filing jointly. Therefore, more people now will claim the standard deduction instead of itemized deductions. Taxpayers claiming the standard deduction will not benefit from charitable deductions or any other itemized deductions. One way to ameliorate this problem would be to “bunch” your charitable gifts in a particular year.

Another strategy that works exceptionally well for people older than 70-1/2 is to make gifts to charity from your individual retirement account (IRA). For people older than 70-1/2, a direct transfer of funds from your IRA to a charity eliminates taxable income and counts toward your required minimum distribution.  This “IRA rollover” strategy generally is better than a tax deduction and it benefits people who claim the standard deduction as well as people who claim itemized deductions.

The new tax law left intact the estate tax exemption for gifts to charities through estates. Gifts to charity through a will or living trust or through a beneficiary designation of an IRA or retirement plan continue to be fully exempt from federal estate tax.

The new law doubled the exemption amount for estate gifts to heirs. Single individuals now can leave approximately $11.2 million to heirs, and married couples can leave approximately $22.4 million to heirs free of federal estate tax. This will make it easier for wealthy people to fund charitable gifts through their estate because they can leave more money to heirs than they would have been able to do under prior law.

The information above is general in nature and is not tax advice or legal advice.  Please contact your attorney or financial advisor for advice specific to your circumstances. If you would like more information, please contact Steve Brier, Co-Chair of the Library Friends Membership and Development Committee, at 503.349.5500 or ssbrier@gmail.com.  All inquiries are strictly confidential.

 

Easy, Tax-Smart, and Impactful Ways to Support the Library – From Your IRA

by Steve Brier, August, 2018

Thank you for your very generous support of North Tillamook Library Friends.  Please take a minute or two to learn about simple and strategic ways to contribute to Library Friends and reduce your tax bill substantially.

Individual retirement accounts (IRAs) — and similar retirement plans such as 401(k) plans — are wonderful vehicles for building a retirement nest egg.  However, when you reach retirement, you discover that it is impossible to use your IRA funds for yourself or your family without incurring a significant income tax liability.  Every dollar you withdraw from an IRA is taxed as ordinary income under federal and state law.  And when you reach age 70-1/2, the IRS requires you to withdraw IRA funds every year (called a required minimum distribution or RMD) and pay tax on the RMD.  If you leave your IRA to your heirs, your heirs will be taxed on every dollar they withdraw from the IRA.  On top of the income tax bite, if you leave your IRA to heirs, your IRA will be subject to estate tax.[1]

There is only one way to prevent taxes from eroding your IRA — use your IRA to support great causes, such as North Tillamook Library Friends.  If you direct a portion of your IRA to North Tillamook Library Friends — either during your life or at the end of your life — you avoid income tax and estate tax and North Tillamook Library Friends is able to use the full amount of your gift to benefit the Library.  And it’s so easy to make it happen, no lawyers necessary!

To make a gift at the end of your life, just sign a new beneficiary designation form from the bank or financial institution that serves as custodian of your IRA.  The beneficiary designation form is short and simple.  You need NOT amend your will or living trust.  We suggest that you designate a percentage of your IRA to go to North Tillamook Library Friends.  That’s all it takes to make a difference in the future of our great Library.  Of course, if your personal circumstances change in the future, you can amend your IRA beneficiary designation form at any time.

If you are 70-1/2 or older, you can make a strategic gift now by directing your annual RMD (or more) to North Tillamook Library Friends.  The IRS allows individuals to direct their annual RMD (or more, up to $100,000/year) to charitable organizations such as North Tillamook Library Friends.  The amount you direct to North Tillamook Library Friends counts toward your required minimum distribution but is not counted as income, so it’s better than a tax deduction.  To take advantage of this favorable “IRA Rollover” provision, your IRA custodian must send a check directly to North Tillamook Library Friends.  The “IRA Rollover” applies only to individuals who are older than 70-1/2.  In many cases, however, younger people can make tax-smart current gifts from IRAs.  Younger people, however, must analyze their tax situation before making such gifts.

Please contact Steve Brier (503.349.5500) for further information.  All inquiries will be strictly confidential.

The information above is general in nature; the information is not legal advice or tax advice.  Please consult your attorney or financial advisor for advice specific to your individual circumstances.