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IRA Rollovers: A Win-Win Situation for Donors, Federation

November 22, 2007
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Thanksgiving is a traditional time to count our blessings and share our bounty with others. Rachel Gross, director of Planned Giving and Endowments for the Jewish Federation of Greater Philadelphia, believes that this holiday also provides an ideal forum for family discussion of how the IRA rollover legislation can help maximize philanthropic giving while minimizing tax liabilities.

Under the terms of this special provision, which expires on Dec. 31, 2007, unless there is further legislative action to extend it, married couples 701/2 years of age or older may contribute up to $100,000 each from their Individual Retirement Accounts to Federation or another public charity recognized by the Internal Revenue Service. The gift can be earmarked by the donor to make a gift to Federation's Jewish Community Fund, create a special endowment fund in support of a specific area of interest in the Jewish community or to perpetuate an annual campaign gift.

Federation Endowment Officer Jennifer Brier has worked with several donors who have been able to increase the amount of their annual campaign contribution because of this IRA rollover provision. After their discussion with Brier, a couple who were longtime annual campaign donors decided to pay their 2007 annual campaign gift to Federation directly from the husband's IRA.

"It was a win-win situation," said Brier, explaining that the couple was able to reduce the husband's minimum required distribution by taking this action. As an added advantage, they were able to increase their annual gift because they did not have to pay income tax on that amount.

With the clock ticking on the time remaining to take advantage of the rollover before it expires, the couple determined that they would use the IRA to advance pay their 2008 annual campaign gift. Both they and Federation derived great benefits from this decision, commented Brier.

"Our donors decided to realize considerable tax savings by rolling over $6,000 from the IRA to Federation, and applying $3,000 to their 2007 gift and $3000 to their 2008 gift. Federation was able to get a jump on its 2008 campaign, as well as enhance its ability to meet current Jewish community needs and more effectively plan for the future," she concluded.

Brier noted that, under the current legislation, there are restrictions placed on the way that the charitable gift is distributed. The law only applies to distributions from IRAs and not to other retirement or pension plans. Also, the gift may not be used to fund a supporting foundation, philanthropic fund, charitable gift annuity or a charitable remainder trust.

The Federation Endowments Corporation does not give tax advice. Donors should call their tax/financial advisers to determine if IRA rollover charitable distributions are right for them.

Donors must authorize the trustees of their IRA in writing to make plan distributions directly to the Federation. Brier is available to answer questions about making contributions under this new law.

Call Jennifer Brier at 215-832-0528 (jbrier@philafederation.org). All inquiries are confidential.

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