IRA trust accounts were created in 1974 by the Employee Retirement Income Security Act (ERISA). More than $9 trillion is held in IRA accounts today, owned by 61% of American households. In 2006, the Pension Protection Act enabled classic IRA account owners age 70½ and older to transfer up to $100,000 per year from their accounts directly to charitable organizations as outright gifts. Qualified IRA transfers are not includible in the account owner’s income and can satisfy the owner’s required minimum distribution.
The charitable IRA provision was intended to be temporary. “Tax extender” laws continuing the charitable IRA provision often were enacted late in a calendar year, and even made retroactive to the previous year, complicating financial planning. The provision was made permanent in 2015.
IRA account owners may take advantage of the tax treatment of charitable gifts regardless of whether they itemize their income tax returns, and their qualified transfers are not subject to AGI limitations. Under the Tax Cuts and Jobs Act of 2017, which doubled the standard deduction, tax-free charitable transfers for traditional IRA account owners age 70½ and older have already increased in importance.
For decades, NACGP and other organizations have been lobbying on behalf of an expanded Charitable IRA Rollover bill that would allow tax-free transfers to a charitable remainder trust or gift annuity. Clinton A. Schroeder and Conrad Teitell began a lobbying effort with the American Bar Association to support this cause in 1982.
NACGP is joining other organizations to support an IRS ruling simplifying distributions to charitable organizations following the death of an account owner. Many IRA administrators now require charities to open an “inherited IRA” account, even though charitable beneficiaries may not be eligible IRA account owners under trust laws. The initiative would clarify and simplify the transfer of IRA assets to charity at the death of the owner.
Gift Planning History 