NEWS :: Red Cloud Indian School

Help Red Cloud, and Yourself, By Using IRS Assets as Gifts
November 1, 2006

HAVE YOU HEARD ABOUT THE IMPORTANT NEW LEGISLATION?
In August, Congress passed the Pension Protection Act of 2006. This important new law can help individuals meet personal, financial and philanthropic goals while benefiting their favorite charitable organizations.

COULD YOU BENEFIT?

Are you at least 70 ½ years old?
Do you own an IRA (Traditional or Roth)?
Are you taking mandatory withdrawals?
Would you enjoy tax savings?

In addition to strengthening America 's retirement system, this new legislation takes positive steps to encourage philanthropy. In fact, it provides opportunities for tax-free charitable giving.

If you own an IRA, and are 70 ½ years of age or older, the Pension Protection Act allows you to make charitable gifts directly from your IRA – saving you taxes!

LIMITED TIME
The legislation is only in effect for this year and next, and once 2006 comes to an end, the opportunity to take advantage of the law for this year is gone.

HOW CAN YOU SAVE TAXES?
The new law allows you to make distributions directly from your IRA to one or more charities without the distributions being included in your taxable income and subject to withholding.

Previously, if you wanted to use IRA funds for a charitable contribution, you had to withdraw money from your IRA and then contribute it. The amount you withdrew was taxable, and the deduction for the contribution may or may not have offset the tax.

Another benefit of the new legislation is that the funds transferred from your IRA to Red Cloud Indian School count toward your mandatory withdrawal (Required Minimum Distribution).

Also, this plan does not affect your Social Security income.

Making charitable contributions from an IRA rather than other assets will be especially appropriate for those who:

do not itemize deductions;
would not be able to deduct all of their charitable contributions because of deduction limitations;
may lose some of their itemized deductions because of their income level; or
are required to take distributions but do not need them for living expenses.

You may give to Red Cloud the amount you are required to withdraw from an IRA without concern for deduction limitations, and without additional taxes on Social Security benefits, state income taxes, or other adverse tax consequences.

ARE THERE SPECIFIC REQUIREMENTS?
In order to take advantage of this new legislation, gifts must be made directly from your IRA to Red Cloud Indian School . You may not take the distribution first and then make a gift to Red Cloud. Certain limitations apply to these non-taxable charitable distributions from an IRA:

They cannot exceed $100,000 per year (per person, so spouses each can give that amount).
They must be made to a public charity and not to a donor advised fund, a private foundation or to a supporting organization.
The gifts must be outright; for instance, they cannot be used to establish a gift annuity or fund a charitable remainder trust.
Funds accumulated in other types of retirement accounts such as a 401(k) do not qualify for this special tax treatment under the Pension Protection Act. Unless, you roll your 401(k) or 403(b) into an IRA, before making the gift.
These tax-free distributions can be made only in 2006 and 2007.

HOW TO TAKE ADVANTAGE OF THIS LAW
If you have been considering a gift to Red Cloud Indian School , you should consider the benefits of using IRA assets for your gifts.

Contact your plan administrator, who will be able to provide you with instructions for making your gift. Be sure that you do not take the IRA distribution first. Of course before making any decisions, you should consult with your own tax, legal or financial advisors regarding the benefits you would enjoy in your specific situation.

Congress is currently working on extending this legislation. We will continue to give updates as they become available.