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IRA Rollover new rules in 2021

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By Robert Nomberg
President & CEO
Richmond Jewish Foundation

In 2020, the CARES Act created a holiday for required minimum distributions from IRAs, but the CARES Act holiday for required minimum distributions from IRAs was not extended to 2021.

In 2021, IRA owners age 72 and older will resume their required minimum distribution (RMD) from IRAs. Fortunately, the law remains that IRA owners age 70½ and older can make a charitable rollover gift of up to $100,000 from their IRA to public charities, this charitable IRA rollover will count toward your required minimum distribution (RMD).

But, there’s no need to wait until the end of the year to make gifts from your retirement account. If you are at least 70 1/2 years old you can make a direct charitable gift to Richmond Jewish Foundation from your IRA account without having to pay federal tax on the withdrawal.

These types of gifts will qualify for your RMD and you can repeat this gift up to $100,000 every year. You can donate proceeds from your IRA to RJF’s Genesis Fund, donate to an existing endowment fund or start your own endowment fund to support the charities of your choice.

You can use your IRA to fund your Life & Legacy commitment during your lifetime. Your new fund will create annual grants to support the charities of your choice.

Examples

Consider this example: Ms. Donor is widowed and 82 years old. She must take her required distribution from her IRA before December 31. In her case, she must withdraw close to 4 percent of the total value of her $1.2 million IRA, or more than $45,000.

In the process, she must pay ordinary income tax on the amount. Instead of making the withdrawal, she makes a distribution of $45,000 to Richmond Jewish Foundation to her endowment fund through her IRA administrator. This amount is “rolled over” and is not subject to federal income tax and it satisfies her mandatory distribution.

Another option for Ms. Donor, if she feels that her IRA income will not be needed for the foreseeable future, is to use the maximum annual benefit of the Charitable IRA Rollover and transfer $100,000. This effectively advances more than two years of this type of gift and reduces the size of her IRA without paying federal tax.

This substantial gift will fund her endowment immediately allowing grants to be made annually to the charities designated in the endowment fund.

It’s a great idea to speak with your financial advisor before finalizing your plans.

To learn more about IRA Rollover Gifts, click here or, contact your IRA administrator or reach out to RJF at (804) 545-8656.

 

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