Your gifts will fund our future
The conversion of your traditional IRA to a Roth IRA will likely propel you into the highest tax bracket of your lifetime. If you determine that a Roth IRA conversion is the right move for you, strategic charitale giving to the Sisters of Providence can offset some of the additional taxes you will incur. This is because charitable gifts are most beneficial from a tax-saving standpoint when you are in a high income tax bracket.
You may wish to speak with your financial advisor to take advantage of federal legislation that allows you to make a direct distribution from your IRA to the Sisters of Providence before December 31, 2011. To qualify for benefits under this legislation, you must be 70 1/2 or older at the time of the gift and transfer the gift directly from your IRA to the Sisters of Providence. Your total IRA gift(s) to charitable organizations cannot exceed $100,000 in 2011.
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Traditional and Roth IRA
You can maximize your tax savings by accelerating your giving and making as many gifts as possible in the year you make the contribution.
For example, if you wish to convert a traditional IRA valued at $50,000 and you normally make charitable contributions of $10,000 per year to support the Sisters of Providence, you could accelerate five year’s worth of future gifts to equal the amount you are converting to a Roth IRA to offset the tax liability resulting from the conversion.
Unlike traditional IRAs, a Roth IRA is not required to make a direct distribution each year after the account owner turns 70 1/2. This is a tremendous benefit for those who don’t need additional income for retirement.
If you don’t need the income right now, you can create a deferred charitable annuity with the Sisters of Providence that would make payments to you at a future date.
If you meet the income requirements, you can continue to make contributions to a Roth IRA after you turn 70 1/2.
Direct distributions from a Roth IRA are income tax free to you and to your beneficiaries.
One way to substantially reduce capital gain tax and spread it over your life expectancy is to transfer appreciated securities to the Sisters of Providence in exchange for a gift annuity. You can take a generous charitable tax deduction in the year of the transfer and the annuity would provide income to you quarterly, which could offset some of the tax attributable to a Roth conversion. You would recognize only a portion of the capital gain, and it would be spread over the rest of your life expectancy.
Are you fully participating in all retirement plans open to you but want to save even more for retirement? You can do so by addressing your retirement and charitable planning goals together.
For example, you contribute $20,000 for each of the next 15 years to the Sisters of Providence that will pay you 5% of its annual value each year for life. Because you don’t need the additional income right now, you include special language in the trust agreement to limit your payout to only the interest and dividends earned by the trust each year for the next 15 years. After 15 years, the trust will start paying you the full 5% annually.
You can deduct a significant portion of your annual contributions to your trust — about $104,000 over the next 15 years saving approximately $36,000 in the 35% federal tax bracket.
If the trust averages a total return of 6% per year, it will pay you more than $23,000 annually and will increase each year if it earns more than a 5% payout.
Bottom line: Over your life expectancy you will receive approximately $484,000 and more than $562,000 will pass to the Sisters of Providence to create your personal legacy.
We urge all donors to consult with your financial and legal advisors for a full discussion of implications of any planned gift.
For additional information on how you can make your IRA work for you, please contact:
Planned Giving Manager
Mission Advancement office
1 Sisters of Providence
Saint Mary-of-the-Woods, IN 47876
Phone: (812) 535-2811
Fax: (812) 535-1009
Available Brochures include:
- Planning for a Secure Retirement: Charitable Options
The Sisters of Providence keep all benefactors, constituents, alumnae/i and companions in daily prayer.