What is the best way to donate IRA savings to charity?

January 16, 2006

Subject:  Tax Question
From:  George
Date:  Sat, 03 Dec 2005

I will be turning 70 1/2 next year and my wife will be 69. We each have a small IRA ($135,000 in total) that we would like to use to establish an endowment at our local community foundation. What are the tax consequences of doing this? Also, is it better to liquidate the accounts and send a check to the foundation or to give the IRAs directly to them?

Thanks for your help. George Taylor


Date:  12 Dec 2005

Hello George,

There is a special rule in effect for cash donations made at the end of 2005 that will enable you to deduct your entire donation on your federal income tax return, provided you itemize your deductions. The donation will probably be more limited on your state income tax return. See the article, "special opportunity..." in our December 2005 newsletter.

Retirement plan proceeds can't be given directly to a charity during your lifetime, so you will have to take the distribution first. Discuss this matter with the community foundation before you go ahead, but don't dawdle - the tax break expires at the end of 2005.

Good luck!
Mike Gray

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