Probate & Trust Law Section Conference Manual ... - Minnesota CLE

. P might consider making such a gift:
i. If P wants to make more charitable gifts than the IRA
Rollover restrictions would permit, and his IRA account is
the only asset available to make those gifts.
ii.
If the gift P wants to make does not qualify under the IRA
Rollover rules, for example, the gift will be made to a
donor advised fund or a private foundation, then this
strategy might be one he considers.
c. At best, a donor using this strategy might hope to break even,
where the charitable deduction offsets the income recognized from
the withdrawal. However, higher AGI can expose more of a
donor’s social security benefits to tax (IRC § 86(a)-(b)) and can
accelerate phase-out of various benefits, such as: personal
exemptions, itemized deductions, educational credits, educational
interest deduction, Roth IRA contributions, and the earned income
credit.
E. Charitable Gifts at Death.
1. Tax Treatment Of Gift To Family.
a. The entire retirement account typically constitutes IRD and is
included as ordinary income in the gross income of the recipient.
b. The retirement account is also included in the owner’s gross estate
for federal and state estate tax purposes. If left to a spouse in a
proper form, it qualifies for an estate tax marital deduction. If left
to children it is included in the owner’s taxable estate.
2. Tax Treatment Of Gift To Charity.
a. If properly structured, the charity will be treated as the recipient of
the retirement account. The entire account will be included in the
charity’s gross income as IRD, however, charities are exempt from
federal income tax under Section 501(c)(3), so no tax will result.
b. A retirement account left to a charity will be included in the
owner’s gross estate for estate tax purposes, however, if the gift is
properly structured it will qualify for an estate tax charitable
deduction.
3. Outright to Charity at Owner’s Death.
a. Beneficiary designation substitutes for charitable gift provision in
will or revocable trust.
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