Seniors: Act Fast If You Want to Transfer IRA Assets Directly to Charity

Philanthropic seniors in the US have only until the end of January to decide whether to make a tax-neutral transfer of up to $100,000 in IRA assets to the charity of their choice. For many, this could significantly lower their tax bill.

A patch in the American Taxpayers Relief Act of 2012 (ATRA) allows taxpayers who are at least 70.5 years old to take advantage of the so-called CARE Act in their 2012 tax filing if they withdrew the assets from their traditional individual retirement account (IRA) in December 2012 and complete the donation by the end of January 2013.

For many donors, the result would be better than the principal alternative—taking a taxable distribution from the IRA and making a tax-deductible donation to a charity—because the taxes due would be larger than the benefit of the tax deduction.

However, some donors would save more on their 2012 taxes by passing up on the CARE Act and contributing zero- or low-basis stock to the charity, instead.

Due to other changes in tax rates in ATRA, contributing zero- or low-basis stock may be a less attractive alternative in 2013 than in 2012. For many donors, this may make the use of the CARE Act the optimal choice for charitable giving in 2013.

As with most tax questions, there are several other factors to take into account before making a final decision, such as state tax rate, adjusted gross income level and the 3% phase-out of itemized deductions this year. Donors should consult tax counsel to determine the appropriate course of action. 

Bernstein does not give tax or legal advice. Taxpayers should consult professionals in those areas before making any decisions.

Brian D. Wodar

Director—Wealth Planning and Analysis Group
Brian D. Wodar is a Senior Vice President and a Director of the Wealth Planning and Analysis Group. He provides customized consultation on complex financial issues facing Bernstein’s high-net-worth investors and their professional advisors. Wodar has expertise in advanced asset allocation, trust and estate planning, planning in advance of a business sale, concentrated single-stock exposure and stock option exercise planning. He has also spearheaded Bernstein’s research on the interplay between spending, investment policies and fund-raising for nonprofits. In addition, he has been an author of and contributor to the firm’s published research on these topics, has been cited in many third-party publications, and is a frequent public speaker. A founding member of the Wealth Planning and Analysis Group, Wodar joined the firm in 1997 and directed the creation and implementation of Bernstein’s Wealth Forecasting System, the firm’s largest private client research effort to date. He holds a BA in English from the State University of New York at Albany, and an MA in literature and an MBA in finance from New York University. Formerly based in New York, Wodar relocated to Chicago in 2005 and to West Palm Beach in 2013.

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