By Anne Delle Donne, CERTIFIED FINANCIAL PLANNER™,
Certified Investment Management Analyst,
M.J. Smith and Associates

A provision of the Pension Protection Act of 2006, recently signed into law, provides a valuable incentive for individuals aged 70 1/2 and older who are looking to transfer assets to charity in a tax-friendly way.

1.  The law allows a tax-free rollover of funds from either a traditional IRA or Roth IRA account for charitable donations.  The only restriction is that the donations be made directly to qualified public charities as defined by the Internal Revenue Service.  Donations to private foundations and donor-advised funds are not covered.
 
2.  The incentive is scheduled to end on December 31, 2007, and will apply to gifts completed by Jan. 1, 2008.  In the past, individuals who wanted to donate IRA funds weren’t able to completely deduct the gift for federal income-tax purposes because of the 50 percent of adjusted gross income (AGI) limit.
 
3.  In the past, income tax had to be paid on IRA withdrawals, so the value of those  gifts was reduced.  Under the new law, the donated funds are transferred directly to charities and are not included in the IRA owner’s income, so they are not taxed.
 
4.  The new law covers all gifts made this year and next, and the provisions expire December 31, 2007 unless Congress extends the law.
 
5.  Anyone interested in making a major gift should consult their financial or tax advisor for more information.
 
M. J. Smith and Associates offers fee based services and a comprehensive financial planning approach, which includes income tax planning.  The firm is a registered investment advisor with the U.S. Securities and Exchange Commission and is one of the five most successful offices out of 2,200 independent branch offices of Raymond James Financial Services, Inc., a national investment firm.  For more information call 303-768-0007 or visit www.mj-smith.com.  Securities offered through Raymond James Financial Services Inc. Member NASD/SIPC.

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