Recent IRA Updates
IRA Rollover Re-Enacted for 2010-2011
I. Current rules of required minimum IRA distributions
As you may know, the tax laws require owners of IRAs and other retirement accounts to begin taking certain minimum payments no later than the year after they become 70½ years old. These minimum distributions are taxable, but they must be taken or the taxpayer will be subject to a 50% penalty tax on any underpayments.
The required annual minimum distributions can be calculated by dividing the total of all your IRA accounts’ year-end value by the distribution period shown in the IRS table below. (Those turning age 70½ can value their accounts as of April 15 of the year following.) For example, Mrs. Jones was 75 with an IRA worth $100,000 at the end of 2008. The table indicates a distribution period of 22.9 years for a 75-year-old. Therefore, Mrs. Jones was required to take out at least $4,367 in 2008 ($100,000 divided by 22.9).
This table also can be used to determine the minimum distributions that must be taken from qualified company retirement plans, such as 401(k)s and profit-sharing plans. (Roth IRAs do not have required minimum distribution amounts.)
Required Minimum IRA Distributions
|
Age of Retiree
|
Distribution Period (in years)
|
Age
|
Distribution Period
|
Age
|
Distribution Period
|
|
70
|
27.4
|
86
|
14.1
|
102
|
5.5
|
|
71
|
26.5
|
87
|
13.4
|
103
|
5.2
|
|
72
|
25.6
|
88
|
12.7
|
104
|
4.9
|
|
73
|
24.7
|
89
|
12.0
|
105
|
4.5
|
|
74
|
23.8
|
90
|
11.4
|
106
|
4.2
|
|
75
|
22.9
|
91
|
10.8
|
107
|
3.9
|
|
76
|
22.0
|
92
|
10.2
|
108
|
3.7
|
|
77
|
21.2
|
93
|
9.6
|
109
|
3.4
|
|
78
|
20.3
|
94
|
9.1
|
110
|
3.1
|
|
79
|
19.5
|
95
|
8.6
|
111
|
2.9
|
|
80
|
18.7
|
96
|
8.1
|
112
|
2.6
|
|
81
|
17.9
|
97
|
7.6
|
113
|
2.4
|
|
82
|
17.1
|
98
|
7.1
|
114
|
2.1
|
|
83
|
16.3
|
99
|
6.7
|
115 +
|
1.9
|
|
84
|
15.5
|
100
|
6.3
|
|
|
|
85
|
14.8
|
101
|
5.9
|
|
|
II. IRA Rollover Gifts to Charity for 2010 and 2011 are Tax-Free.
All IRA withdrawals are taxable to you (whether taken as a required minimum distributions from your IRA or from your other IRA funds). However under the federal IRA Rollover Law, gifts of funds from your IRAs up to $100,000 per year to charities such as Lyric Opera can be made tax-free. Under this law, you must be age 70½ or over when you make the gift, and you must not withdraw the funds directly. Rather, the funds must be “rolled-over” from your IRA account by the fund administrator to the charities you designate.
The IRA rollover law is a unique opportunity, for those who do not itemize their deductions, to make a charitable gift tax-free. Since a charitable gift can only be taken as an itemized deduction from your income tax, those who do not itemize were never able to take advantage of the charitable deduction. But if you use your IRA to make a gift to Lyric, you will not have to pay any tax on your IRA withdrawal, even if you don’t itemize.
By using your IRA to make gifts now, you can prepay existing pledges you have with Lyric Opera, and avoid the IRA withdrawal tax. Or you can prepay gifts you may wish to make to Lyric in the future, and still procure the same tax-free benefits now.
III. Naming Lyric Opera as a Beneficiary of your IRAs and Retirement Plans at death still Avoids all Estate and Income Taxes on those Proceeds.
As you may know, if you leave all your IRAs and retirement plans to your family members or any other non-charities, the funds will be double-taxed. Besides being subject to estate taxes, these assets are also subject an income tax. (Remember when all this income was tax-deferred in these special kinds of retirement accounts? The IRS wants it all back from your beneficiaries after you are gone!)
To avoid this double-taxation, leave your IRAs and other retirement funds to charity such as Lyric Opera. We are tax-exempt and so there is no estate or income tax on these funds. You should instead leave other kinds of assets to your family members, not these.
Contact us for more information. If you are interested in using your IRA funds to make a gift to Lyric Opera, either during your lifetime or at death, contact Lyric’s Director of Planned Giving, Jonathan Siner, at (312) 827-5677 or planned_giving@lyricopera.org for up-to-date information and specifics on how to use your IRA funds to make a gift to Lyric Opera.