IRA rollover 2012

Year End Tax Planning – Here We Go….

Year end holiday shopping is already happening – what about year end tax planning?  And, what are the opportunities (and pitfalls) for fundraisers?

Click here for a link to a recent Forbes piece.  In short, they are recommending selling capital gains property while the 15% bracket still exists.  Not a great message for charitable giving which usually says “avoid capital gains by giving your appreciated property.”  So, we might see advisors not steering clients toward charitable gifts to avoid capital gains but rather cashing in on gains at current low tax rates.

The bonus will be in 2013 when capital gains will almost certainly jump back to 20% (and 23.8% for higher earners from the Obamacare tax on investment income).  Capital gains avoidance will hopefully be more relevant for major gifts and planned giving in 2013 and beyond.

I love this one from the Washington Post:  EARN MORE, PAY MORE (click here to see it) – just reminding investors who have been enjoying paying only 15% on dividends – they may see their taxes on those same dividends almost triple!  Max rate on that same dividend will be 43.4%!  Hey, trade in that dividend stock for a CGA!  Run the numbers and it is impressive what a CGA offers when dividends are so highly taxed.

Actually, the article mentions that companies may speed up dividends to be distributed before year end (and let their shareholders get one last taste of 15% taxes). Maybe your donors will have some windfalls to play with (i.e. give to your charity)?

Lastly, a client just asked where we are standing on the IRA rollover (included in the tax extenders).  Click here on the latest on this issue.  In short, no tax extender until fiscal cliff talks are finished.  Who thinks the fiscal cliff is getting resolved before the end of the year?   This means that fundraisers have to wait a few more weeks before giving up hope (or not) on year-end IRA gifts.


2012 IRA Giving Alert – Interesting Question

This morning at Planned Giving Advisors, we sent out an email with donor-ready, “cut and paste” text to alert your prospects of steps they should be considering should they be interested in IRA rollover giving this year.  We are advising that prospective IRA rollover donors consider waiting to see if the expired IRA giving law is reenacted before taking any IRA withdrawals in 2012.  This would allow anyone interested in using the IRA rollover to satisfy their Required Minimum Distribution (RDM) to preserve and utilize that important tax savings feature should the law come back into effect later in the year.

If you would like a copy of the donor-ready IRA alert, please feel free to contact Kevin Kasper at or by phone at 973-732-2455.

In response to our email alert, we received an interesting question that was worth posting:

Why not simply advise donors to have the distribution go from their IRA directly to charity in 2012.  If the rollover is reinstated it will qualify, and if it is not the distribution would be characterized as a withdrawal followed by a gift to charity.  In either case, it would qualify as their minimum distribution.

I think it is a great question, even though we didn’t take that approach.  Here is our response:

What you are saying is definitely true from a legal/tax planning perspective.  In fact, anyone even age 59 ½ and older could be encouraged to give from IRAs, take the income tax hit, and get a mostly offsetting deduction.  Why hasn’t that idea worked in practice? 

 The problem is that donors in general have never taken to the idea of making a charitable gift that will cause taxable income even though they would get a “mostly offsetting” deduction.  You can never say it is a “non-taxable” transaction because you don’t know how the extra income impacts their tax brackets – and I believe this is enough of a reason for most donors not to be interested.  The beauty of the IRA charitable rollover provision is that it creates a clear, zero tax transfer method and that apparently works for donors.

 From a marketing perspective, our approach is to put in front of prospects the most palatable options.  By asking donors to commit an IRA rollover gift before the law is reenacted, even though you can project little or no tax cost should it not be reenacted, is still a bit risky.  In face to face conversation with prospects, if they understand the risks and costs, your idea is certainly an option.  But, in an email alert, we favor sticking with options that have the least resistance from typical donors.