Retirement Plans and Charitable Giving

Retirement plans can present tax-smart charitable giving opportunities both (1) during a donor’s lifetime, as well as (2) in the donor’s estate plans.

1. Charitable Giving Opportunity with an IRA During a Donor’s Lifetime—Available for Those 70½ and Older

The Charitable IRA Rollover is a way for donors age 70 ½ and older to pay less tax while supporting their favorite charities. A Charitable IRA Rollover allows donors to direct up to $100,000 (or less if they choose) from their traditional IRA to charity, tax-free.

The Charitable IRA Rollover creates an opportunity for donors to establish an endowment or make an outright charitable gift to a charitable organization. Your rollover can be directed for a capital campaign gift, current needs, or restricted for endowment purposes. Your gift can be earmarked for your synagogue, a local Jewish agency, Jewish education, or any program or organization that is important to you.

Note, in 2020 where there is no RMD (Required Minimum Distribution), there may not be an income-tax advantage to using the IRA Charitable Rollover. In addition, donor advised funds do not qualify for the IRA Charitable Rollover.

This strategy may be right for you if:

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You want to make a qualified charitable gift from your IRA to reduce the value of future distributions you will be required to take

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You do not itemize your deductions and would like to realize an increased tax benefit for your giving

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You wish to make an impactful gift to benefit the community

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You already contribute to charity at your deduction limit, and you want to donate more

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You do not need your Required Minimum Distribution—all it does is raise your tax liability

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You have a secondary smaller IRA you do not need

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You wish to remove up to reduce your IRA and remove from your taxable estate

Please consult your professional advisor concerning your tax plans.

2. Retirement Plans as Part of Your Estate Plan

Retirement plans such as IRAS/401Ks/403bs are tax-plagued assets when they are left to a non-spouse beneficiary

Under the Secure Act, a non-spouse beneficiary of an IRA/401K/403B must withdraw the entire amount of the inherited retirement within 10 years –non-spouse beneficiaries are no longer permitted to “stretch” the withdrawals over their lifetime. For example, Mr. Cohen passes away (assume Mrs. Cohen predeceased him) and his 2 sons are the named beneficiaries of his $150,000 IRA. The sons will need to withdraw the entire $150,000 within 10 years, which means paying about $50,000 in income tax. That $150,000 asset, when left to the Cohen sons, will only be worth about $50,000. A $1,500,000 IRA? The sons will need to withdraw it within 10 years and pay about $500,000 in taxes!

Tax smart solution

If Mr. Cohen had named a charity as the beneficiary of the IRA, at Mr. Cohen’s passing, the charity would have received the entire IRA, tax-free. Mr. Cohen could then leave his other, tax-free assets to his sons.

Differences between retirement plan gifts to charity during lifetime vs. in donor’s estate plan

During Lifetime In Estate Plan
IRA Only (Not from 401K/403B)* IRA/401K/403B okay
Maximum $100,000 per year No Maximum
Any U.S.-based public charity (but not to donor advised fund) Any U.S.-based public charity (including donor advised fund)
Not subject to income tax Not subject to income or estate tax
Accomplished via rollover/distribution from IRA directly to charity Accomplished by naming charity as designated beneficiary for all or part of the retirement plan
Contact plan administrator for rollover paperwork Contact plan administrator for proper beneficiary designation form
Must be 70½ or older Can designate at any time but charity will only benefit at your passing

*Want to take advantage of the charitable IRA rollover but only have a 401K/403B rather than an IRA? See if you can roll your 401K/403B into a qualified IRA.

Please consult your professional advisor concerning your tax plans.

Let's Start a Conversation

The Jewish Foundation can help you explore charitable opportunities that work for you. 

The Jewish Foundation is a trusted and expert resource for charitable gift planning and endowments and serves as a partner and resource for synagogues, local Jewish agencies, professional advisors and donors.

When you make a current gift or leave a bequest to the Jewish Foundation of Greater New Haven, you not only benefit our community, but you can also support the causes that are important to you.  You can designate that your gift be used to provide unrestricted funds to help meet community needs now and in the future or to endow a permanent fund to aid identified programs, your synagogue, agencies, organizations, or initiatives (Jewish or not Jewish, in Greater New Haven, Israel or beyond) that are of particular interest to you and your family.

Lisa Stanger, Esq., Executive Director
Tiberius Halai, Grants and Gift Manager
Beth Kupcho, Scholarship and Philanthropy Manager
Stephanie Licsak, Controller

Jewish Foundation of Greater New Haven
360 Amity Road
Woodbridge, CT 06525
203-387-2424, ext. 382
203-387-1818 (fax)
lstanger@jewishnewhaven.org
Jewishnewhaven.org

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