Fond du Lac Area Foundation- HR4 Article

New Pension Law Also Provides for Charity

Provision Allows for Tax-free Charitable Transfers from IRAs

Fond du Lac, WI – Since 1974, millions of Americans have saved billions of pre-tax dollars in Individual Retirement Accounts (IRAs). Thanks to continued savings and investment returns, an estimated $3.6 trillion is currently invested in IRAs, and the total continues to grow. Today, a federal law was enacted allowing IRA owners to share the wealth of their retirement savings by giving directly to charity—without first counting it as income and paying income tax.

The new law could be a boon to local philanthropy.

“This is a wonderful win-win—for people who would rather give to charity than pay taxes—and the nonprofit organizations they choose to support,” said Sandi Roehrig, Executive Director of the Fond du Lac Area Foundation.

Thanks to decades of deliberate saving and favorable investment returns, a substantial share of today’s retirees have more money in their IRAs than they’ll ever need. Many have expressed an interest in giving the funds to charity, but income tax must be paid on all withdrawals, which sharply reduces the value of the gift. Others have asked about designating their children as beneficiaries, but that may draw additional tax consequences.

“For larger estates, a good portion of IRA wealth goes to estate taxes and income taxes of beneficiaries,” Roehrig said. “Experts estimate heirs will receive less than 25% of most IRA assets that pass through estates.”

A provision in the new federal Pension Protection Act of 2006, signed by President Bush Thursday, creates a new option: transferring IRA assets directly to charity. By going directly to charity, the money is not included in the IRA owner’s income and—most importantly—is not taxed, preserving the full amount for charitable purposes. The law covers all gifts made this year and next.

In 2006 and 2007, holders of traditional and Roth IRAs who are at least 70 ½ years old can make direct charitable transfers up to $100,000 per year. As a qualified public charity, the Fond du Lac Area Foundation can help donors execute the transfers and choose from several charitable fund options for their gift. Donor Advised Funds do not qualify for tax-free IRA transfers.

“This really is a limited-time offer: the window is open now, but it will close in 2007 unless Congress extends it,” said Roehrig. “For anyone interested in establishing a permanent legacy in this community, this is the opportunity of a lifetime to make the gift of a lifetime.”

The Fond du Lac Area Foundation through its philanthropic services, grant making, and community leadership, helps people support the causes they care about now and for generations to come.

Giving the gift of a lifetime. Having more retirement money than you need is a great problem to have, and now it’s easier to solve. However, generous IRA donors still face multiple options for their gift. Support the entire community? Support a special cause? Shore up a favorite charity? Here are just three of the options that donors can choose from.

Fond du Lac Area Foundation Community Fund: Meeting ever-changing community needs.

IRA transfers to the Community Fund address a broad range of current and future needs. The Fond du Lac Area Foundation evaluates all aspects of community well-being-arts and culture, community development, education, environment, health and human services-and awards strategic grants to select projects and programs.

Field of Interest Fund: Connecting personal value to high impact opportunities

IRA transfers to Field of Interest Funds allow donors to target gifts to causes important to them: such as the arts, social services, education, the environment, the elderly, youth, and more. The Fond du Lac Area Foundation awards grants to community organizations and programs addressing the donor’s specific interest area.

Designated Fund: Helping local organizations sustain and grow.

IRA transfers to Designated Funds allow donors to support the good work of a specific nonprofit organization—a senior center, museum, or any qualifying nonprofit charitable organization.

If you are interested in learning more about ways to contribute and what this means to you, please contact Sandi Roehrig or Joe Braun at the Fond du Lac Area Foundation. You can call at (920) 921-2215, or see us on the web at www.fdlareafoundation.com.

Fond du Lac Area Foundation

Phone: (920) 921-2215
Fax: (920) 921-1036
384 N. Main Street - Suite 4
Fond du Lac, WI 54935