California Estate Planning Attorneys Kavesh Minor & Otis

Act fast: the fiscal cliff deal has a special tax break for cash donated by seniors to charity in Jan. 2013.

If you are past age 70-1/2, you probably already know that you must take required minimum distributions (RMDs) from your traditional IRA, and that you must pay income taxes on those distributions (this does not apply to Roth IRAs). What you may not know is, if you are charitably inclined, the American Taxpayer Relief Act(commonly referred to as the Fiscal Cliff Deal) allows you to avoid income taxes by directing those RMDs to a qualified charity with an IRA Charitable Rollover. The rule applies for 2013, and includes a small window of opportunity for 2012 donations as well.

We have had this deal before, but Congress let it expire at the end of 2011. So, it’s likely that most people already took their 2012 RMDs, as required by law, before December 31st. If you didn’t, though, Congress has given you until January 31st, 2013 to make a charitable contribution that can satisfy all or part of your RMD for 2012. Confused? You may want to read more about it in the Forbes article, “Fiscal Cliff Deal Allows Giving IRA Assets to Charity.”

If this giving strategy sounds appealing to you, bear a few things in mind:

  • To qualify, your donations must be directed from your IRA to the charity, and cannot be distributed to you first. Ask the account custodian to send the distribution directly to the charity.
  • Your donations cannot go to donor-advised funds, supporting organizations or private non-operating foundations. Otherwise, the money can go to any organization to which you can make a gift that would qualify as a charitable deduction on your tax return.

For more information on charitable contributions please visit my estate planning website.

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If you need to speak with an experienced estate planning lawyer please contact us online or call us directly at 800.756.5596 to first register for one of our free, informative seminars. Your attendance will qualify you for a special discount for our estate planning services should you decide to make a free appointment at the conclusion of the seminar and choose to proceed with us. We proudly serve clients throughout California with offices in Torrance, Newport Beach, Orange, Woodland Hills and Pasadena.

Philip J. Kavesh
Nationally recognized attorney helping clients with customized estate planning guidance for over 40 years.
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