If you are interested in financial planning – as I am always encouraging fundraisers to get into – this story by Deborah Jacobs (a Forbes writer) is a small one that could end up being very important for the nonprofit world:
Assuming you have read the article, here is my take on it and a story:
Back in 1998, on one of my first planned giving expeditions, my boss gave me the topic of IRA tax depletion to discuss in front of a regional board at the nonprofit I worked at. Very excited, I had some easy facts at my disposal – adding up income and estate tax rates to prove that people were downright crazy not to leave their entire IRAs to charity (to avoid upwards of 80% tax depletion).
And, I learned one of my first lessons in this field the hard way – know the full story before getting up in front of a group. Sure enough, a few seconds into my presentation, a lawyer in the room quickly dismissed my hypothesis. In short, he said the Stretch IRA method made my exaggerated claims of tax depletion for the most part irrelevant to those with heirs.
And, you know what? He was right. Stretching out IRAs over generations makes a lot of sense for family wealth transfers.
That is, until this proposed legislation gets enacted. If it happens, I will finally be able to say with complete confidence that leaving your IRA to a charity (after spouses are taken care of) is the best planning option for IRAs – without worrying about the spoil sport lawyer in the room.