Maryland Bar Bulletin
Publications : Bar Bulletin : June 2007


Since 1974, millions of Americans have saved billions of pre-tax dollars in Individual Retirement Accounts (IRAs). Thanks to continued savings and investment returns, an estimated $3.6 trillion is currently invested in IRAs, and the total continues to grow. On August 17, 2006, a federal law was enacted allowing IRA owners to share the wealth of their retirement savings by giving directly to charity – without first counting it as income and paying income tax.

The new law could be a boon to local philanthropy.

“This is a wonderful win-win – for people who would rather give to charity than pay taxes – and the nonprofit organizations they choose to support,” states Barbara K. Lawson, President of The Columbia Foundation in Howard County.

Thanks to decades of deliberate saving and favorable investment returns, a substantial share of today’s retirees has more money in their IRAs than they’ll ever need. Many have expressed an interest in giving the funds to charity, but income tax must be paid on all withdrawals, which sharply reduces the value of the gift. Others have asked about designating their children as beneficiaries, but that may draw additional tax consequences.

“For larger estates, a good portion of IRA wealth goes to estate taxes and income taxes of beneficiaries,” Lawson explains. “Experts estimate heirs will receive less than 25 percent of most IRA assets that pass through estates.”

A provision in the new federal Pension Protection Act of 2006, signed by President Bush, creates a new option: transferring IRA assets directly to charity. By going directly to charity, the money is not included in the IRA owner’s income and – most importantly – is not taxed, preserving the full amount for charitable purposes. The law covers all gifts made this year and next.

In 2006 and 2007, holders of traditional and Roth IRAs who are at least 70 ½ years old can make direct charitable transfers up to $100,000 per year. While donor-advised funds and private foundations do not qualify for the transfers, Maryland Community Foundations offer a variety of types of funds that can accept a rollover gift and carry out a charitable purpose – for example:  field of interest funds, scholarship funds, designated funds and unrestricted funds.

“This really is a limited-time offer: the window is open now, but it will close in 2007 unless Congress extends it,” says Michael W. Davis, Esq., President of the Columbia Foundation Board of Trustees, and Partner at Davis, Agnor, Rapaport & Skalny, LLC. “For anyone interested in establishing a permanent legacy in this community, this is the opportunity of a lifetime to make the gift of a lifetime.”

Gift of a Lifetime: Shopping for Charity

Having more retirement money than you need is a great problem to have, and one that’s now easier to solve. But generous IRA donors still face multiple options for their gift. Support the entire community? Underwrite a special cause? Shore up a favorite charity? Here are three suggestions:

  • Unrestricted Funds:  Meeting ever-changing community needs. IRA transfers to a community fund address a broad range of current and future needs. A community foundation evaluates all aspects of community well-being – arts and culture, community development, education, environment, health and human services – and awards strategic grants to select projects and programs. “For people who care deeply about this community and its people,” says Lawson, “this fund is an excellent way to address our most pressing needs, today and tomorrow.”
  • Field of Interest Funds: Connecting personal values to high-impact opportunities. IRA transfers to Field of Interest Funds allow donors to target gifts to causes important to them: arts, AIDS services, urban education, neighborhood revitalization, youth welfare and more. A community foundation awards grants to community organizations and programs addressing the donor’s specific interest area. “For those who are particularly passionate about a single cause,” says Lawson, “Field of Interest Funds provide strategic, lasting support – even as needs change over time.”
  • Designated or Scholarship Funds: Helping local organizations sustain and grow. IRA transfers to Designated Funds allow donors to support the good work of a specific nonprofit organization – a senior center, museum or any qualifying nonprofit charitable organization. “For people who want to help secure the future of their favorite charities,” says Lawson, “our endowed Designated Funds give nonprofits a steady stream of income, plus planned giving and investment management services.”

Maryland’s Community Foundations

Maryland has 11 community foundations, serving citizens in 15 counties and Baltimore City. Each Maryland community foundation is a nonprofit, community corporation created by and for the people of Maryland. Two more community foundations are currently forming. Their mission is to help donors make a positive impact on their community. Community foundations offer a variety of giving tools to help people achieve their charitable goals and have expertise on issues and trends in charitable giving instruments and strategies.

Contact your local community foundation to learn more about how they can assist you in helping your clients take advantage of the charitable IRA rollover provision at

Buffy Beaudoin-Schwartz is Director of Maryland’s Community Foundations.

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Publications : Bar Bulletin: May  2007