Window of Opportunity!
--New Pension Law!
Are you required to take an
IRA withdrawal for 2006 and 2007?
Temporary incentives are in place
for those 70 1/2 years of age and older to make tax-free
charitable gifts from previously taxable Individual Retirement
Account (IRA) funds.
Since 1974,
millions of Americans have saved billions of pre-tax dollars in
Individual Retirement Accounts (IRAs). Thanks to continued savings
and investment returns, an estimated $3.6 trillion is currently
invested in IRAs, and the total continues to grow. Now, under the
federal Pension Protection Act of 2006, IRA owners may share the
wealth of their retirement savings by giving directly to charity
–without first counting it as income and paying income tax.
Thanks to
decades of deliberate saving and favorable investment returns, a
substantial share of today’s retirees have more money in their IRAs
than they’ll ever need. Many have expressed an interest in giving
the funds to charity, but income tax must be paid on all
withdrawals. Others have asked about designating their children as
beneficiaries, but that may result in additional tax consequences.
For larger estates, experts estimate heirs will receive less than 25
percent of most IRA assets that pass through estates.
The Pension
Protection Act of 2006 creates a new option: transferring IRA assets
directly to charity. By going directly to charity, the money is not
included in the IRA owner’s income and–most importantly–is not
taxed, preserving the full amount for charitable purposes. The law
covers gifts made this year and next. In 2006 and 2007, holders
of traditional and Roth IRAs who are at least 70 1/2 years old can
make direct charitable transfers of IRA assets up to $100,000 per
year.
As a qualified
public charity, Jewish Family Service can accept gifts of such
assets into unrestricted agency endowment funds. A tax-free IRA
transfer to the JFS endowment held at the Community Foundation for
Southeast Michigan, may also qualify to receive a 50 percent match
under the Community Foundation’s current endowment matching-gift
opportunity.
The IRA
provision expires at the end of 2007, unless Congress extends it.
The legislation also contains provisions that address charitable
gifts of items such as food, clothing and personal property, such as
art, as well as including provisions covering private foundations
and supporting organizations. To learn more, consult with your tax
or legal adviser.
Life Insurance
Definition
A donor may transfer ownership of a life insurance policy to Jewish Family Service (JFS)
or make JFS the beneficiary of the insurance policy.
How
The donor completes a change of ownership/beneficiary form that can be supplied by your
insurance company. JFS receives a lump sum payment upon the death of the insured.
Benefits
· Donor may have a superfluous policy and would like JFS to benefit
· Donors can make a larger philanthropic gift through life insurance that may be possible
as an outright gift. Affordable premiums can produce a large death benefit.
· Donor received an income tax deduction for paid-up life insurance policies replacement
value (the cost of obtaining and identical policy).
Best For
· Donors who may have taken out "extra" life insurance policies that will not
be needed.
· Donors who wish to make a large philanthropic gift to benefit JFS but cannot afford to
make an outright gift.
For more information about giving life insurance gifts, please contact: David Moss,
Director of Marketing and Development, at 248.592.2333
BEQUEST
The children are covered. The grandchildren are covered. Your spouse is provided for. But
what about the Family?
Including Jewish Family Service in a bequest contained in your will is an easy way to
provide for our community's future, while achieving a significant tax advantage. You can
direct that JFS receives either a fixed percentage of your estate or set dollar amount.
You can also leave an automobile or paid-up life insurance policy.
Substantial tax savings are achieved when your estate is settled because the amount of
your gift is deducted in its entirety from the estate's taxable value.
Establishing a bequest to benefit JFS allows you to make a significant gift to the
community while retaining lifetime control over your assets.
If you don't already have a will, please consult your attorney.
For more information on creating a memorial for future generations, please call the
Development Office at 248.592.2333
Donating Appreciated Stock Makes
Sense!
Even though you give Tzedakah because you want to help others, JFS can help you benefit
when you donate Appreciated Stock.
People often acquire stocks or mutual funds when they are young, and hold them for many
years. Over time, those securities grow in value. As people grow older and want to give a
portion of their estate to charity, they discover that by contributing the appreciated
stock, they do not lose much in terms of current income. In fact, when appreciated stock
is contributed to Jewish Family Services or another public charity, the donor is able to
take a current income tax charitable deduction equal to the fair market value of the
stock. If the donor sold the stock, he or she would be required to pay a tax on capital
gain.
For example, Mr. and Mrs. Cohen own stock valued at $10,000; the purchase cost 20 years
ago was $2,000. The stock is currently paying $100/year in dividends. The Cohens are in
the 36% tax bracket.
If the Cohen's contribute the stock to JFS, they avoid the 20% tax on the $8,000 gain (the
difference between the $10,000 value and the $2,000 cost), thus escaping a $1,600 capital
tax liability. In addition, they may deduct from current income taxes the full $10,000
value of the stock, saving 36% or $3,600.
In essence, the Cohens are able to contribute an asset for which they only paid $2,000 and
in turn, realize a $3,600 tax savings. The Cohen's are able to give the appreciation that
has grown throughout the years to JFS, and assure that care continues for those in our
community who are most vulnerable.
For information on donating appreciated stock, contact
the JFS Development
Office at 248.592.2333. Or contact Stacey Crane at
the Jewish Federation of Metropolitan Detroit, 248.203.1461.
