Making an IRA Rollover to a Qualifying Nonprofit Gives Donors More Bang for the Buck

Glaze

Q&A with ABHOW Foundation President Jeff Glaze

Jeff Glaze has served as the president of the ABHOW Foundation for two years. Prior to his work at the Foundation, Glaze served as ABHOW’s vice president of Financial Planning and senior vice president and chief operations manager. In the below interview, Glaze explains how individuals can decrease and simplify their taxes, and benefit qualifying nonprofits and public charities—get more bang for the buck—through the Protecting Americans from Tax Hikes (“PATH”) Act, which passed in 2015.

Q: What is the Protecting Americans from Tax Hikes (“PATH”) Act?

A: At age 70½, individuals who own an Individual Retirement Account (“IRA”) are required to begin withdrawals known as required minimum distributions (“RMD”). A provision within the Pension Protection Act of 2006 allowed individuals, who owned an IRA and were 70½, the ability to transfer up to $100,000 every year from their IRA directly to a qualifying nonprofit without tax penalties. This provision, however, had to be renewed by Congress each year. In 2015, Congress passed the PATH Act, making the provision permanent, effective January 1, 2016. 

Q: What are the consequences of the provision’s permanent status?

A: Older IRA holders can now rely on the charitable transfer as a viable option when performing tax planning for retirement income.

Q: What are the tax benefits of transferring directly to a charity?

A: If an individual takes a required minimum distribution, it will increase their adjusted gross income and may affect other income-based benefits, such as Social Security and Medicare. However, transferring some or all of the RMD to a qualifying nonprofit avoids such concerns as the money transferred isn’t included in the individual’s adjusted gross income.

Q: Are distributions taken over the year or are they taken at all at once?

A: It can be done either way. The IRA charitable transfers are recognized in the tax year they are made. Some individuals will take it throughout the year and some opt to take it in one lump sum. It does not matter if the donor makes one or several gifts throughout the tax year as long as they do not exceed the $100,000 annual maximum.  Talk to your financial and/or tax advisor to determine what is best for you. 

Q: How much is the required minimum distribution?

A: Most IRA owners follow the Uniform Table to calculate the appropriate distribution that annually increases each year.   For example, the required minimum distribution is 3.65% at age 70½, 5.35% at age 80 and 8.77% at age 85.

Q: Can a direct transfer from an IRA be made to the ABHOW Foundation?

A: Yes. To qualify, the transfer must be made to a public charity or an operating private foundation, such as the ABHOW Foundation.

Q: How can I learn more about such investment vehicles as well as rollover procedures and requirements?

A: Seek the advice of a financial and/or tax advisor. If you determine that you would like to make a transfer to a nonprofit, specifically the ABHOW Foundation, please feel free to obtain additional information by contacting Andrea Schulte, planned giving advisor (at aschulte@abhow.com or 480-226-3024) or myself (at jglaze@abhow.com or 925-924-7214).

About ABHOW

Founded in 1949, ABHOW is widely known for its pioneering leadership in senior housing and health care. The company serves 6,200 residents in 50 retirement communities in California, Arizona, Nevada, Washington, Oklahoma and Idaho and employs more than 2,400 team members. To learn more about ABHOW visit www.abhow.com.

This article appears in the February 2017 issue of ABHOW Words.