Working to Shape a Less Taxing, More Prosperous Future


The current calendar year is drawing to a close. Many, in good faith, had resolved to make 2010 gifts of cash, stocks, mutual funds, real estate and other appreciated assets to Federation to help assure the future of the Greater Philadelphia Jewish community. It's not too late to act on these good intentions and realize significant tax savings.

Congress has passed comprehensive tax-cut legislation that includes a reinstatement of the IRA Charitable Rollover and other charitable giving incentives through the end of 2011. The two-year extension will allow individuals 70 and older to donate up to $100,000 directly from their IRAs to charities. The gift will be counted toward the donor's required minimum distribution, and will be excluded from the donor's income for federal purposes and will not be taxed. Although the gift will not be eligible for a charitable tax deduction, it will not count toward the annual percentage limitation on the donor's other deductible gifts, and it will not reduce the donor's other itemized deductions.

Individuals who make charitable transfers before Feb. 1 can treat them as if they were made in 2010. This will provide additional time for IRA custodians to process charitable transfer requests. Under the provisions of the new legislation, a donor must instruct their IRA administrator to transfer funds directly to the charity. If a donor withdraws funds from the IRA first and then contributes them to charity, the tax benefit is lost. Further, IRA charitable rollovers cannot be made to donor advised funds, supporting organizations, split-interest trusts or in exchange for gift annuities.

Federation Endowments Corporation chairman Bennett L. Aaron urges donors interested in taking advantage of the IRA charitable rollover for their gift to Federation's 2010 annual campaign to "act immediately, as contributions to Federation must be made by Dec. 31 to be included in our 2010 annual campaign."

Contributions made after Dec. 31 will be posted to the 2011 annual campaign.

Aaron suggests that donors use their IRA funds to "make their 2011 annual campaign gifts, or create an endowment that will make a gift to the annual campaign every year in perpetuity, or support a specific issue or organization in the Jewish community that is important to them."

Other Year-End Opportunities

Rachel Gross, Federation's director of Planned Giving & Endowments, advises that Federation offers a wide variety of endowment vehicles. Federation's Philanthropic Funds are donor-advised funds that can be established with an initial gift of $5,000 or more.

"They are extremely popular with our donors, as they are easy to set-up and maintain," she says.

Federation's Philanthropic Funds may be established in the name of individual donors, who have the right to recommend distributions in the future. Fund donors receive an immediate charitable income-tax deduction for contributions, and they may avoid capital-gains tax if they establish or add to an existing fund through contributions of long-term appreciated securities.

Gross cautions that all recommended distributions from a donor-advised fund must be to qualified 501(c) (3) tax-exempt charitable organizations like Federation. A Philanthropic Fund can also be used in conjunction with a private foundation to help manage the required 5 percent minimum distribution. All or part of the distribution can be placed in a donor-advised fund at Federation.

Guaranteed Income for Life

A charitable gift annuity can be established with Federation for a minimum of $10,000, beginning at the age of 55.

Gross says that the annuity "is especially appealing to charitably-minded seniors who are on a fixed income or desire a stable level of income, as well as those who are adverse to risk."

She describes this vehicle as "a practical way for individuals to earn a high rate of return, receive a current income-tax deduction and provide a gift to Federation," adding that "donors also receive a portion of their annuity payment tax-free during their expected lifetime."

Gross emphasizes that Federation's gift annuity program affords the donor "the flexibility to designate the use of the funds remaining at death."

"Donors may add the remainder of their annuity directly to our unrestricted fund, the Fund for Israel, a permanent field of interest fund or a named restricted fund at Federation," she continues.

"Alternatively, the remaining assets can be placed in a permanent endowment fund to benefit a local Jewish communal organization or synagogue."

Taking Stock in the Future

"The stock market is rebounding, making appreciated stock a sound planned giving vehicle," explains Gross.

Individuals who have owned stock for more than one year can receive full value for the gift, including all the appreciation.

Gross adds that "neither the donor nor Federation will pay capital-gains tax on the gift … therefore, the more the stock has appreciated, the greater the benefit."

The Federation Endowments Corporation does not give tax advice. Donors should call their tax and/or financial advisers to determine which philanthropic option is right for them.

To learn more about endowed giving through Federation, call Rachel Gross at 215-832-0572 or e-mail her at: [email protected]

All inquiries remain confidential.



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