IRA Distribution

Charitable Remainder Trust

Make a donation to Food For Thought that provides you with an income stream for life

Do you have an asset/investment with a potentially large capital gain? How about avoiding the capital gain, receiving a tax deductible charitable donation and also receive an income stream for life?

Creating a charitable remainder trust (CRT) can provide these benefits. By making a gift to charity of the appreciated asset through the use of a CRT, you can:

  • Avoid capital gains taxes that could significantly devalue the asset
  • Receive an income tax deduction for the value of the ultimate gift to the charity
  • Exclude the value of the asset from their taxable estate
  • Create a source of lifetime income

And for IRA required minimum distributions:

Donate your Required Minimum Distribution from your IRA
You must be 70½ or older in order to make qualified charitable donation (QCD). You direct your IRA trustee to make a distribution directly from your IRA (other than SEP and SIMPLE IRAs) to Food For Thought. The distribution must be one that would otherwise be taxable to you. You can exclude up to $100,000 of QCDs from your gross income in 2011. If you file a joint return, your spouse can exclude an additional $100,000 of QCDs in 2011. Note: You don’t get to deduct QCDs as a charitable contribution on your federal income tax return since it is not being taxed as a taxable distribution–that would be double dipping.

 

QCDs count toward satisfying any required minimum distributions (RMDs) that you would otherwise have to receive from your IRA in 2011, just as if you had received an actual distribution from the plan. It has to be a direct transfer. Distributions that you actually receive from your IRA (including RMDs) that you subsequently transfer to a charity cannot qualify as QCDs.

Why do this? You satisfy your RMD without it being taxed AND it is excluded from your adjusted gross income (AGI). By reducing your AGI you can increase the amount deductible for other charitable donations, medical expenses and investment expenses. It can also reduce the amount of Social Security that is taxable or reduce your long term capital gain rate. Many tax deduction and tax credits are limited by AGI so we advise you to speak with your tax professional before making a QCD. or call Don Spradlin at Food For Thought 707-887-1647 x102 with any questions.