What You Need to Know About IRAs Right Now

Today we welcome back a special guest on the blog: Stelter’s Senior Technical Consultant, Lynn Gaumer, J.D. Lynn returns to share a special IRA update.

When it comes to marketing the IRA charitable rollover, is January the new December?

Christopher Hoyt, Professor of Law at the University of Missouri-Kansas City School of Law, seems to think so. Professor Hoyt recently posted on the National Association of Charitable Gift Planners CGP Link his thoughts on timing for marketing IRA charitable rollovers.

Traditionally, many nonprofits focus their IRA charitable rollover marketing efforts in the latter part of the year. And that makes sense. Many donors do not need the extra income and wait until near the end of the year to take their required minimum distributions (RMD). They may prefer to postpone their distributions so their accounts can grow (hopefully) over the course of the year. The traditional marketing strategies still work for these donors.

Now let’s take a look at Professor Hoyt’s recommendation to market the IRA charitable rollover in the first part of the year. His reasoning is that donors 70 ½ and older who do not need the extra income should use their RMD to make gifts during first part of the year–thus assuring that the gifts come from RMD opposed to an additional distribution at the end of the year. If these generous donors wait to make a gift from their IRA until later in the year, they may have already taken their RMD for the year and therefore will have to make additional distributions for their charitable gifts. They will not optimize their tax benefits.

According to Hoyt, the donors who make their “IRA gifts early in the year using their RMD have the flexibility in December of taking taxable distributions from their IRA, making additional charitable gifts, or leaving assets in their IRA to accumulate for future years.”

Marketing Tip

So is January the new December? Professor Hoyt makes an excellent observation.

Stelter recommends you continue to market the IRA charitable rollover in the final months of the year, but add some additional marketing at the beginning the year as well. The benefits of marketing for this gift vehicle both at the end of the year and the beginning are two-fold, for your organization and its donors.

First, your organization benefits by increasing awareness of the need for this gift type. Secondly, educating your donors on the benefits of making this gift at the end of the year vs. the beginning of the year is vital. The information you provide enables your donors to make the best decision for them and their gift.

Time is Running Out

Cash those IRA charitable rollover checks before year-end!

If you receive a check from a donor who has check-writing privileges from their IRA account, be sure to cash the check by Dec. 31. For qualified charitable distributions, the gift is complete when the check is cashed by the nonprofit, not when the check is mailed.

If the donor uses their required minimum distribution to make the gift and the nonprofit does not cash the check by Dec. 31, the RMD will not be withdrawn in time and the donor could incur an IRS penalty of 50% of the amount not withdrawn. This is a different standard than if the donor simply wanted to make a charitable donation from a regular checking account. In that case, the gift is complete when the check is mailed.

Find more information on IRA checks in Russell James’ recent article.

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