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2012 Changes May Hurt Older Americans Who Support Charities

Posted By Reed Sandridge On December 7, 2011 @ 4:39 pm In Create the Good | Comments Disabled

Image courtesy www.evasvillage.org

If you give to charitable organizations, you definitely want to read this post. There are some important changes being made to how some charitable contributions are treated that can potentially affect you.

Two main areas to be aware of relate to IRAs and Charitable Gift Annuities.

IRAs

It is unclear right now if the IRA charitable rollover law will remain in place in 2012. What this means is that unless Congress intervenes people over the age of 70½ who are required to take a distribution from their IRA will no longer enjoy the current provision that allows for up to $100,000 of IRA assets to be directly transferred to charity without the funds being treated as revenue.

As it is not treated as revenue you will not be responsible for federal income tax nor future estate taxes on these contributions. If you and your spouse are both required to take distributions, you can transfer up to $100,000 each. This provision only applies to IRA withdrawals and are not applicable to any other type of retirement plan.

Charitable Gift Annuities

A charitable gift annuity is perhaps the most popular planned giving option. It allows you to give a portion of your assets (cash or property) to a cause you care about, while at the same time providing you with a lifetime stream of fixed annual payments. If you have significant savings in CDs or savings accounts, you may receive more income with a gift annuity – check out the rates below!

The American Council on Gift Annuities, the organization that recommends gift annuity rates, has recommended lower rates starting in 2012. What this means to you is that if you are considering making a gift annuity in the coming months you will most likely receive a less favorable rate after December 31, 2011. The chart below is for individuals and shows the current rate compared with the new rate starting January 1, 2012.

Age

Current Rate

Rate Starting Jan. 1, 2012

65

5.3%

4.7%

66

5.4%

4.8%

67

5.5%

4.8%

68

5.6%

4.9%

69

5.7%

5.0%

70

5.8%

5.1%

71

5.9%

5.3%

72

6.0%

5.4%

73

6.2%

5.5%

74

6.3%

5.7%

75

6.5%

5.8%

76

6.6%

6.0%

77

6.8%

6.2%

78

7.0%

6.4%

79

7.3%

6.6%

80

7.5%

6.8%

81

7.7%

7.0%

82

7.8%

7.2%

83

8.0%

7.4%

84

8.2%

7.6%

85

8.4%

7.8%

86

8.6%

8.0%

87

8.9%

8.2%

88

9.2%

8.4%

89

9.5%

8.7%

90+

9.8%

9.0%

The changes reduce payments by less than a percent, but over the span of several years this could make a noticeable difference. Remember that charities often times establish a minimum amount for these irrevocable gifts, such as $10,000, in order to set them up. Please also note that there are changes to the joint and survivor rates as well.

The information, content and data within this blog post are to be used for informational purposes only and should not replace professional advice. Before making any financial transaction you should consult with your own financial advisor.


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