I want to share with you certain charitable giving options that have become very popular in the world of estate planning, and how they can be used to make gifts to Boca Helping Hands. They involve individual retirement accounts (“IRAs”).
It is well recognized that an IRA is becoming a very sizeable portion of an individual’s estate. If you are over 72 years of age, Congress allows you to give up to $100,000 of your required minimum distribution (“RMD”) in any calendar year to Boca Helping Hands. The transfer must be made by the trustee of the IRA directly to Boca Helping Hands. The transfer cannot be made by you. The portion of your RMD that you give to Boca Helping Hands is not subject to ordinary income tax. You do not receive a charitable deduction for the amount given, but at least the donated amount is not subject to income tax. This is not a one-time gift, but until the law is changed, the gift can be made in any calendar year. Many of my clients have taken advantage of this income tax rule to reduce their annual income tax burden.
You can also designate Boca Helping Hands to receive all or a certain percentage of your IRA at the time of your death. This decision has become more popular with the change to the rules regarding the income taxation of benefits from an inherited IRA that became effective January 1, 2020. Under the old rules, a beneficiary was able to withdraw amounts from an IRA with minimum annual distributions based on the life expectancy of the person who inherited an IRA. A designated child or grandchild, for instance, someone in their teens or in their 20s or 30s, could defer distributions over a long period of time. With very limited exceptions, the new law requires anyone other than a surviving spouse to withdraw the IRA within 10 years of the death of the original owner.
Amounts withdrawn from an IRA are subject to ordinary income tax. Many people do not want to see their IRA be subject to income tax of over 40%, a common rate if you include federal and state income taxes. However, any amount of an IRA passing to charity is not subject to income taxes. That is why leaving an IRA or a portion of an IRA to charity has become very popular.
As with any gift involving one’s estate, you should discuss your specific situation with your accountant, an attorney, or a professional tax advisor. If you’re interested in making a gift to Boca Helping Hands, please contact Development Manager Karen Swedenborg at Karen@BocaHelpingHands.org or 561-417-0913 ext. 202.
BHH Board Member Emeritus David GartDavid A. Gart is a partner in the West Palm Beach office of Shutts & Bowen LLP, where he is a member of the firm’s Private Client Services Practice Group. He is a Martindale-Hubbell AV® rated attorney and has been recognized among the Best Lawyers in America® in Trusts and Estates. He is the author of a chapter on “Wills and Testamentary Trusts,” published by the American Bar Association.
