Trust and Estate Counsel

Tennessee Estate Planning Law

Insight and commentary on estate planning issues impacting affluent residents of Tennessee

Tax Relief Act of 2010 Part 1 - Charitable IRA Rollovers

On December 17, 2010, the President signed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (“Act”). In addition to extending the so-called “Bush” income tax cuts for two years, the Act made several significant changes to estate, gift and generation-skipping transfer taxes. This article is the first of a series summarizing various provisions of the Act.

The Act extended for 2010 and 2011 the ability of taxpayers who are at least 70½ years of age to transfer $100,000 per year from their IRA to charity. If you missed this opportunity in 2010 and may want to give more than $100,000 during 2011, you can do so if you act by January 31, 2011. There is a special provision that allows you to use the amount you didn’t use in 2010 during January 31 of 2011. Assume, for example, that you made a Charitable IRA Rollover of $20,000 on December 28, 2010. You can give as much as $180,000 in 2011. However, at least $80,000 of the 2011 Rollover must occur on or before January 31, 2011. You would then be able to give the other $100,000 any time during the year.

If the most that you would give in 2011 is $100,000, then you do not need to worry about the January 31 deadline. If you might give more than $100,000 this year, then you should roll over part of the gift before the end of January. For example, if you might give $150,000 this year, you should give at least $50,000 by January 31.

Before making a Charitable IRA Rollover, you should investigate making a Synthetic Charitable IRA Gift. The Synthetic Gift technique also helps those who do not qualify for a Charitable IRA Rollover or do not like some of the restrictions imposed with respect to Charitable IRA Rollovers.