September 22, 2017

Investing with Faith / Joanna Feltz

Use traditional IRA distributions to create income tax-free endowment

Joanna FeltzTraditional individual retirement accounts (IRAs) are wonderful savings vehicles because they allow your money to grow, tax-free, over many years until you begin making withdrawals at retirement. But did you know they also provide tax benefits for faithful Catholics establishing endowment funds?

Upon reaching age 70 1/2, you must begin annually withdrawing a minimum amount, called the required minimum distribution (RMD), based on a schedule set by the Internal Revenue Service. The first payment can be delayed until April 1 of the following year.

State and federal governments classify your RMD as taxable income because taxation was deferred while the funds remained in your IRA.

However, if you roll over a portion of your RMD into an endowment fund to benefit a non-profit organization such as an archdiocesan parish, school or ministry, you can do it income tax-free. Called a charitable IRA rollover or a qualified charitable distribution (QCD), it benefits both you and the non-profit because no income taxes will have to be paid on the donated funds.

Recently at the archdiocesan Catholic Community Foundation, we helped a retired couple create a memorial endowment fund for an Indianapolis Catholic high school by utilizing the charitable IRA rollover. The endowment provides a scholarship for a student entering the high school from a specific Catholic grade school, also located in Indianapolis.

The couple chose to create the fund because they believe the high school plays an important role for its community and needs to attract even more deserving students.

By being able to offer additional, meaningful academic scholarships to these students, they are helping the school continue to instill strong moral and religious values as the size and quality of its classes increase.

Working with the custodian of their IRA, the Catholic Community Foundation was able to readily explain the details of the program to the couple and to answer their questions. We can do the same for you.

To learn how you can create an endowment fund that will turn your passion into a lasting legacy, Catholic Community Foundation staff and I are always happy to assist you. Feel free to reach out to me by e-mail at jfeltz@archindy.org or by phone at 1-800-382-9836, ext. 1482, or 317-236-1482.
 

(Joanna Feltz, J.D., is director of planned giving for the Catholic Community Foundation in the Archdiocese of Indianapolis, and consultant to the law firm Woods, Weidenmiller, Michetti, Rudnick & Galbraith PLLC. For more information about planned giving, log on to www.archindy.org/plannedgiving. Tax information or legal information provided herein is not intended as tax or legal advice and cannot be relied on to avoid statutory penalties. Always check with your legal, tax and financial advisors before implementing any gift plan.)

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