Charitable Alt-IRA for Clients

The Charitable Alt-IRA is a Charitable IRA Rollover alternative offering clients a strategic way to use appreciated securities to fund donor-advised funds. It follows financial planning “best practices,” using qualified charitable gifts to offset tax liabilities.

Why Not Use a Charitable IRA Rollover?

The Charitable IRA Rollover offers substantial benefits to clients seeking to donate to charity from their IRA account. Perhaps its greatest fault is that it needs regular legislative renewal and congress has often renewed it with little time to act. In tax year 2012 clients had to act in January 2013 – or you lost the opportunity. In tax year 2014 donors had only the last two weeks of December 2014 to act.

Beyond often having a limited time to act, the Charitable IRA Rollover provision has restrictions built into it that limit its appeal.

  • Age. Clients qualify for a Charitable IRA Rollover at age 70-1/2 or older.

  • Donation Amount. The provision limits donations to $100,000 annually per person.

  • Donation Beneficiary. Contributions must go directly from the IRA custodian to a public charity – donors may not take possession of the funds. Donations also cannot go to a donor-advised fund, supporting organization or private foundation (with the exception of a private non-operating foundation meeting conduit rules).

Why Use a Charitable Alt-IRA?

The Charitable Alt-IRA offers fewer limits than the Charitable IRA Rollover while offering a number of advantages.

The fewer limitations include:

  • Age. Clients qualifying for an IRA distribution at age 59-1/2 or older, instead of age 70-1/2 or older, qualify for a Charitable Alt-IRA.

  • Donation Amount. The only limits are the availability of stock for donation and the availability of IRA funds to offset the stock donation. Standard financial and tax planning considerations apply, including deductibility limits for more generous donors.

  • Donation Beneficiary. The Charitable Alt-IRA technique creates a donor-advised fund advised by the donor(s). Qualifying charities for grants from donor-advised funds are similar to those of Charitable IRA Rollovers, but the creation of the donor-advised fund itself offers your clients additional charitable, financial and tax planning benefits.

The advantages of the Charitable Alt-IRA over the Charitable IRA Rollover include:

  • Creating a Donor-Advised Fund. Clients create a donor-advised fund that helps make donor charitable gift planning flexible, easy and tax efficient.

  • Donating Appreciated Securities. Clients gain numerous advantages from donating appreciated securities in their portfolio to a donor-advised fund.

  • Stability for Planning. Clients gain stability in charitable, financial and tax planning from the Charitable Alt-IRA.

The Charitable Alt-IRA depends on established techniques for donating securities and their tax treatment. While change is always possible, the Charitable Alt-IRA currently offers more predictability for financial and tax planning than the Charitable IRA Rollover. With the Charitable Alt-IRA you can use it now.

Interested in learning more about the Charitable Alt-IRA? Contact The Advise Us Fund at (708) 800-8474 or use our Contact Form