New law allows tax-free charitable gifts from IRAs

10:53 a.m., Aug. 18, 2006--Under the Pension Protection Act of 2006 signed into law this week by President George W. Bush, for a limited time and under specific circumstances, individuals may make tax-free distributions to charity from traditional and Roth Individual Retirement Accounts (IRAs).

Under prior law, such charitable IRA distributions were included in gross income, subjecting the donor to income tax on the charitable distribution, which discouraged the use of IRA assets in lifetime charitable giving.

For IRA withdrawals to qualify for exclusion from gross income, the following requirements must be met:

A maximum of $100,000 per donor per year may be given;
Charitable gifts must be completed by Dec. 31, 2007;
The IRA owner must be at least 70-1/2;
The gift must be made in an outright manner (gifts to fund gift annuities or charitable remainder trusts do not qualify);
Distributions to private foundations, donor-advised funds or supporting organizations do not qualify;
The distribution must be made directly from the trustee of the IRA to the charitable recipient. (Donors will need to check with their IRA trustees, or their advisers if they self-direct funds, for details on making charitable distributions. Donors should not take the distribution themselves and subsequently write a check to charity--unless so advised by their own adviser based on their individual circumstances.).

The charitable community has long lobbied for legislation that would allow individuals to use their IRAs for charitable giving without paying income tax on the distribution. Numerous versions of such legislation have been before Congress over the years--all without success. With the recent passage of the Pension Protection Act of 2006 and its IRA charitable rollover provision, millions of additional gifts can be generated to support the vital missions of charities nationwide.

To learn how to use this new opportunity to support the University of Delaware, contact Paula M. Armstrong, director of planned giving, at (302) 831-2104 or by e-mail at [parmstro@udel.edu].

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