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Planned Giving

Charitable IRA Rollover

Now you can reliably plan charitable IRA rollover gifts, year after year.

On Dec. 18, 2015, the president signed legislation indefinitely extending the charitable IRA rollover, making it retroactive to Jan. 1, 2015, with no expiration date.

Read below for answers to frequently asked questions about this popular option.

Also, feel free to call the Office of University Advancement at 205-665-6215 to learn how the charitable IRA rollover provision can help you support your area of choice at the University of Montevallo.

FREQUENTLY ASKED QUESTIONS

What is a charitable IRA rollover?
The charitable IRA rollover, or qualified charitable distribution (QCD), is a special provision allowing certain donors to exclude from taxable income – and count toward their required minimum distribution – certain transfers of Individual Retirement Account (IRA) assets that are made directly to public charities, including the University of Montevallo Foundation.

Since it was first made available in tax year 2006, many UM donors age 70.5 or older have used this popular option to support the areas of their choice with tax-wise gifts ranging from $100 to $100,000.

How does this help me?
A charitable IRA rollover makes it easier to use IRA assets, during lifetime, to make charitable gifts.

Why will lifetime IRA gifts be easier?
Under current law, withdrawals from traditional IRAs and certain Roth IRAs are taxed as income, even if they are immediately directed to a charity. The donor receives a tax deduction for his or her donation, but various other federal, and sometimes state, tax rules can prevent the deduction from fully offsetting this taxable income. As a result, many donors have chosen not to use IRA assets for lifetime gifts. The charitable IRA rollover eliminates this problem.

What gifts qualify for a charitable IRA rollover?
A gift that qualifies, technically termed a “qualified charitable distribution,” is:

  • Made by a donor age 70.5 or older
  • Transferred from a traditional or Roth IRA directly to a permissible public charity, such as the University of Montevallo Foundation. (If giving in this manner, please tell your broker or fund manager to name you as the donor on the transfer, and if your gift is intended for a particular area have the broker specify that as well.)
  • Completed during the applicable tax year

Is there a limit on the amount that can be given?
Yes, there is a limit. An individual taxpayer’s total charitable IRA rollover gifts cannot exceed $100,000 per tax year.

What about the required minimum distribution?
If you have not already taken your required minimum distribution in a given year, a qualifying rollover gift can count toward satisfying this requirement.

Is an income tax deduction also available?
No. The gift would be excluded from income, so providing a deduction in addition to that exclusion would create an inappropriate double tax benefit.

Why are Roth IRAs included? Aren’t withdrawals from a Roth IRA tax-free?
Withdrawals from a Roth IRA may be tax-free only if the account has been open for longer than five years or if certain other conditions apply. Otherwise, withdrawals are taxed as if they came from a traditional IRA. Therefore, certain Roth IRAs could benefit from a charitable IRA rollover.

Can other retirement plans, such as 401(k) and 403(b) accounts, be used?
No. However, it may be possible to make a tax-free transfer from such other accounts to an IRA, from which a charitable rollover can then be made.

Can a gift be made to any charity?
No. Excluded are:

  • Donor advised funds
  • Supporting organizations
  • Private foundations

Who can benefit from using the charitable IRA rollover to make a gift?

  • Persons with significant assets in an IRA
  • Persons making gifts that are large, relative to their income. (Because a charitable rollover is not included in taxable income, it does not count against the usual percentage limitations on using charitable deductions.)
  • Persons having so few deductions that they choose not to itemize

Can a rollover gift be used to pay my pledged support to the University of Montevallo?
Yes. You can honor your gift pledge to the University of Montevallo with one or more qualified charitable IRA rollover transfers of up to $100,000 per person, per calendar year. You can direct your IRA provider to transfer your charitable gift to the University of Montevallo Foundation quarterly, annually or other timing that works for you. Simply have your provider indicate that the transfer is a gift from you.

Can a rollover gift be used to fund a charitable remainder trust or charitable gift annuity?
No. The donor can receive no benefits in return for the gift. This includes life income plan payments.

Can a rollover gift be used to maintain or improve a donor’s standing?
No. While a charitable IRA rollover gift can be made to Athletics, the donor is not permitted to receive any privileges in exchange for the gift. Otherwise, the gift will not be a qualified charitable IRA rollover.

Are there any benefits that a donor can receive?
The only permissible benefits from a charitable IRA rollover gift are those that would not reduce the tax deduction for which the donor would have otherwise qualified. At the University of Montevallo, a charitable IRA rollover gift is allowed to count toward naming opportunities and toward recognition society memberships such as the President’s Circle and King House Society.

What if a withdrawal does not meet the requirements of a charitable IRA rollover?
It simply will be included in taxable income as other IRA withdrawals currently are.

Is the charitable IRA rollover right for everyone?
While this is a great option, other types of gifts may provide donors with more tax benefits. As with any gift planning question, donors should consult their tax professionals for specific advice.

Can I still make a gift with an IRA beneficiary designation?
Absolutely! Whether or not you choose to make a charitable IRA rollover gift, you can still designate the University of Montevallo Foundation as a beneficiary to receive IRA assets after your lifetime. The lifetime charitable IRA rollover is simply another option for donors who would like to see their philanthropy at work now.

If I made a charitable IRA rollover gift in other tax years, can I do this again for the current tax year?
Yes. The current law extends the charitable IRA rollover provision indefinitely — with no expiration date — allowing individuals to make qualifying gifts every tax year.

More questions?
Contact University Advancement by calling 205-665-6215.