2011 IRA Q&A

If you're looking for the most tax-effective gift to make to the Geneva Foundation, Congress extended a law for 2011 that allows individuals 70½ or older to make take-free gifts now using funds transferred directly from their IRAs to qualified charitable organizations like ours. You can transfer any amount up to $100,000 through the end of 2011.

How This Benefits You
• The transfer generates neither taxable income nor a tax deduction, so you don't have to itemize to take advantage of this opportunity.
• The transfer may count against your unsatisfied required minimum distribution from your IRA.
• You can see firsthand the difference your philanthropic dollars make to those we serve.

Note: The legislation does not permit direct transfers to charitable trusts, donor advised funds, or charitable gift annuities. In addition, this opportunity applies only to IRAs and not other types of retirement plans.

Q&A: Making a Gift Under the Legislation

Q: What if there are two organizations I want to support?
A: You can give each charitable organization $50,000 in 2011, or any other combination that totals $100,000 or less. If your spouse is 70½ or older and has an IRA, he or she can also give up to $100,000 from his or her IRA.

Q: I'm turning 70½ in a few months. Can I make a gift now?
A: No. The legislation requires you to reach 70½ by the date you make the gift.

Q: I've already named the Geneva Foundation as the beneficiary of my IRA. What are the benefits of making a gift now instead of from my estate?
A: Since you already named the Foundation as a beneficiary of your IRA, you are familiar with the fact that whoever inherits your account must pay income taxes on the proceeds. But, by naming a charitable organization as the beneficiary, this tax is eliminated. Making a gift of up to $100,000 from your IRA while you are alive, however, allows you to see your philanthropic dollars at work. You are jump-starting the legacy you would like to leave and giving yourself the joy of watching your philanthropy take shape.

Is Your Estate Plan Overdue for an Update?

You may have created your first will early in life when you started a family or after losing someone close to you. Though you may have had good intentions of keeping your plans up to date, your busy lifestyle may have overshadowed the urgency. Today, with important decisions to make about where to distribute your hard-earned assets, it is especially important tom make sure your plans reflect your current wishes. The following list of common mistakes is a gentle reminder of how truly important it is to keep your plan in shape.

Don't Make These Mistakes

Overlooking changes in your family situation. Your marriage, divorce or remarriage, the birth of a child, or the death of your spouse are obvious reasons to revise your will. Failure to make changes or updates to your will may result in disinheritance or financial hardship for loved ones who depend on you.

Overvaluing or undervaluing your estate. If the value of your assets has changed substantially, you may want to change the size of your bequests to your family and favorite causes. Otherwise, some beneficiaries may receive amounts that are either too small or too large in comparison to the current size of your estate. The preferred strategy is to use percentages, not dollar amounts.

Not keeping your estate plan current with changing tax laws. Last year in 2010, estate taxes were originally repealed. Then Congress made changes allowing the estates of those who died in 2010 to use the tax structure under the repeal or under the $5 million basic exclusion that applies for 2011 and 2012. In 2013, the exclusion amount will drop to $1 million, unless further tax law changes are made.

Stay Current

In addition to the change in the estate tax law, check with your attorney to see if your estate is affected by any of these other 2011 tax law changes.

The carryover cost basis tax structure for inheritors was originally applicable for all 2010 estates. But under the new law, 2010 executors must elect for carryover basis to occur. Carryover cost basis means those inheriting assets receive them at the same cost basis that the deceased had originally paid for the assets. In 2011 and 2012, beneficiaries inherit assets at a cost basis equal to the fair market value as of the date of the deceased's death, or, in some cases, six months later.

Like the basic estate tax exemption, the exemption level for generation-skipping transfer taxes is also $5 million with a federal tax rate of 35 percent. This means that if you leave more than $5 million in property to a grandchild or anyone two or more generations younger than you, your gift will incur additional tax. This $5 million exemption is only applicable in 2011 and 2012, as well.

The top gift tax rate is 35 percent with a $5 million exclusion amount unified with the estate tax exemption. The annual tax gift exclusion -- the amount you can give to anyone gift tax-free each year -- will remain at $13,000 in 2011 ($26,000 for married couples).

Income and capitol gains tax rates will remain the same for individual taxpayers in 2011 and 2012.

Your Next Steps

Review these changes with your estate planning attorney to find out if any revisions to your plans are necessary and to learn about smart tax planning options that can help you leave more for your loved ones. Remember, a well-planned, up-to-date estate plan can ensure that your assets will be divided among family and other beneficiaries fairly, economically, and as you intended. If an estate plan update is in store, consider using that time to include a gift to the Geneva Foundation of Presbyterian Homes. Contact us at 877-440-4001 or genevafoundation@presbyterianhomes.org to learn about your options.