1. A Guide to IRA Charitable Rollovers Pension Protection Act of 2006 With Case Studies James E. Connell FAHP, CSA Connell & Associates Charitable Estate and Gift Planning Specialists

2. James E. Connell FAHP, CSA Connell & Associates Charitable Estate and Gift Planning Specialists Signed by Bush on August 17, 2006  Allows for IRA rollovers to charity  Both regular IRA accounts and Roth IRA accounts are eligible  Charity must be eligible  Individual must be 70 ½ or older on the date of contribution  Qualified Charitable Distribution will qualify for the Required Minimum Distribution requirements of IRA  $100,000 limit  $200,000 from couple with separate accounts  2006 and 2007 transfers only  Transfers from other pensions and profit sharing plans, i.e. Keogh, 401k, 403b, etc., are not allowed  Possible to rollover above accounts to IRA if plan and time permit A Guide to IRA Charitable Rollovers

3. James E. Connell FAHP, CSA Connell & Associates Charitable Estate and Gift Planning Specialists A Guide to IRA Charitable Rollovers

4. James E. Connell FAHP, CSA Connell & Associates Charitable Estate and Gift Planning Specialists Eligible charities  501(c)3 public charities  509(a)1 and section 170(b)(1)(A)  Field of interest funds  Restrictions on use of gifts permitted (i.e. scholarship funds or building funds)  Not Permitted  509(a)(3) supporting organizations Especially effects hospital foundations  Donor advised funds  Private foundations A Guide to IRA Charitable Rollovers

5. James E. Connell FAHP, CSA Connell & Associates Charitable Estate and Gift Planning Specialists Permitted transfers/gifts Qualified Charitable Distribution (QCD)  Outright gifts only  No charitable gift annuities  No charitable remainder unitrusts  No charitable remainder annuity trusts  No pooled life income funds  No “quid pro quo” gifts  No personal benefits  No special events  No athletic tickets A Guide to IRA Charitable Rollovers

6. James E. Connell FAHP, CSA Connell & Associates Charitable Estate and Gift Planning Specialists  Suggested procedures  Notify charity of potential gift  Instruct custodian/trustee of IRA on the proper form and if no form send a complete letter of instructions with payment/gift to the charity as a “third party payment”  Transfer will be mostly cash but in-kind transfers (i.e. securities) are permitted  Keep records of transfer and substantiation from charity  If appropriate, elect out of withholding A Guide to IRA Charitable Rollovers

7. James E. Connell FAHP, CSA Connell & Associates Charitable Estate and Gift Planning Specialists  Donor Profile – Convenience Donor  Most delay taking distributions until the last quarter of the year in order to grow the remaining funds tax free  If actively making charitable gifts may consider the benefits of taking them from their IRA account(s) No inclusion in income No income tax deduction Qualifies for Minimum Required Distribution (RMD) A Guide to IRA Charitable Rollovers

8. James E. Connell FAHP, CSA Connell & Associates Charitable Estate and Gift Planning Specialists  Donor Profile – Non-Itemizers  May be donors with modest IRA account balances, but sufficient retirement income from personal investments and tax-exempt accounts  Taking MRD may not significantly increase their lifestyle  Do not have significant tax deductions State and local income taxes Interest expenses Medical expenses Charitable deductions  So the standard deduction applies (2007), over 65 Married/Joint - $11,750 one / $12,800 two Single - $6,650 Head of household - $9,150 A Guide to IRA Charitable Rollovers

9. James E. Connell FAHP, CSA Connell & Associates Charitable Estate and Gift Planning Specialists  Donor Profile – Generous or Major Donors  Most have large IRA accounts  May be giving at or above the 50% of AGI limit  May be subject to the 3% reduction rule if AGI exceeds $156,400 (2007)  May wish to make a large gift with immediate impact for a special project in 2007  Carry forward may or may not be a concern because of age, health or wealth  May have filled up their 30% limit with a carry forward and have no 50% assets to contribute A Guide to IRA Charitable Rollovers

10. James E. Connell FAHP, CSA Connell & Associates Charitable Estate and Gift Planning Specialists  Donor Profile – Social Security Donor  Social security is subject to two taxes when income reaches certain levels  A tax on 50% of SS income at the first level  A tax on 85% of SS income at the second level  Donors with income in excess of the second level may consider reducing their taxable income by making gifts from their IRA accounts thus reducing their taxable income limit A Guide to IRA Charitable Rollovers

11. James E. Connell FAHP, CSA Connell & Associates Charitable Estate and Gift Planning Specialists  Case example  $500,000 IRA account, with a $30,000 Required Minimum Distribution A.$30,000 to charity B.$10,000 to charity, $20,000 to owner C.$100,000 to charity: $30K to charity #1 $30K to charity #2 $30K to charity #3 $10K to charity #4 D.$100,000 to charity and $50,000 to owner A Guide to IRA Charitable Rollovers

12. James E. Connell FAHP, CSA Connell & Associates Charitable Estate and Gift Planning Specialists  Case Example  Carol in Florida, widow, husband was former DuPont employee, died under Hospice care, lives in a total care retirement facility, does not spend the income generated by her IRA retirement assets  Age 81, with $113,000 in IRA totally invested in Vanguard Windsor Fund  Received her $5,500 RMD in January and reinvested RMD into Vanguard Tax-Exempt Fund, has significant tax-free retirement income  Objective: Give total IRA account to Hospice  Plan: Give $90,000 in November 2006 Give balance of account in January 2007 A Guide to IRA Charitable Rollovers

13. James E. Connell FAHP, CSA Connell & Associates Charitable Estate and Gift Planning Specialists  IRA account with deductible and non- deductible contributions  IRA account value of $100,000 with $20,000 non- deductible contributions and $80,000 of deductible contributions and earnings, no other IRA, normally withdrawals follow the pro-rata rules  $80K is distributed as a QCD  Under the provisions of HR4 the QCD is considered coming from income first up to the total amount that would be includable in gross income  All $80K is exempt from taxation  Balance of $20K is not subject to taxation and can be withdrawn income tax-free  What if only $40K was distributed? Effects subsequent pro-rata formula for taxation of RMD A Guide to IRA Charitable Rollovers

14. James E. Connell FAHP, CSA Connell & Associates Charitable Estate and Gift Planning Specialists  Other Concerns  Conversions of other retirement accounts to IRA accounts  Custodian or trustee reporting on 1099R  Custodian or trustee minimum QCD levels  State income tax impact for charitable gifts  State income tax impact for QCD  Electing out of withholding for MRD  Charity substantiation for $250 or over following the rules of Tax Revenue Section 1.170A-13f, contemporaneous written acknowledgement A Guide to IRA Charitable Rollovers