Gifts from IRAs on rise

Your Money

March 18, 2007|By Janet Kidd Stewart | Janet Kidd Stewart,Chicgo Tribune

Brother, can you spare your IRA?

It may be difficult for some workers and retirees to imagine being financially comfortable enough to forgo a portion or all of their individual retirement accounts, but charities are reporting a surge of interest in the new tax incentive for doing just that.

Created by last year's Pension Protection Act, the provision allows people older than 70 1/2 to donate up to $100,000 from their IRAs directly to a charity. Known as qualified charitable distributions, they come out tax-free to the IRA holder and the charity, count toward IRAs' required minimum distributions and are excluded from adjusted gross income.

The tax break is set to expire at the end of the year (for April 2008 filing), but bills introduced in Congress would make it permanent and lift the $100,000 limit.

Charitable organizations, which have been lobbying for the tax break, report they are seeing significant numbers of gifts coming from IRAs since last summer, when the temporary measure passed.

The National Committee on Planned Giving, which is tallying IRA charitable distributions reported by its members and others, said it has information on at least 2,921 distributions totaling more than $56 million. Maximum distributions of $100,000 accounted for 9 percent of the gifts and 45 percent of the dollar value of total distributions.

One of the maximum gifts came from John Arndt, a Gainesville, Ga., retired real estate executive who funds medical research and scholarships at his undergraduate alma mater, the University of Wisconsin.

Arndt, 74, is a self-made multimillionaire who worked his way through law school at night in Atlanta, graduating in 1960. He practiced at a law firm for two years, then quit and went fishing for two weeks because, he said, the firm's environment wasn't for him.

Arndt took a job as controller for a client he formerly represented that was in the process of going public. He retired from that real estate investment trust, Cousins Properties Inc., two decades later at 51.

"It was fun to make the money, but it's been more fun to give it away," said Arndt, who donated $450,000 overall last year, primarily to the University of Wisconsin and charities associated with blindness prevention. "I really believe education is the solution to all the world's problems," he said. As for the blind: "I've seen so many beautiful things these people have missed."

It's not clear whether the new law will boost charitable giving overall, or if it will simply accelerate the giving that donors like Arndt planned to leave to charities in their estates anyway.

The allure of being able to see a charity benefit from these gifts during one's lifetime is certainly real, but it raises a cautionary note for retirees of lesser means to make sure these gifts are made with funds that they won't need later. Retirement is stretching into several decades for some people, and giving away a chunk of the nest egg is no insignificant matter.

When a donor told the St. Louis Zoo that she would be giving her entire IRA, officials asked if they could speak to her financial adviser to make sure it wouldn't represent a financial hardship down the road, said Steven Rosenblum, the zoo's director of planned gifts. The adviser assured them the woman didn't need the account, Rosenblum said.

Since last fall, the zoo has received a dozen IRA gifts totaling more than $200,000.

Robert Addis, 74, gave the zoo $50,000 and gave another $50,000 to the St. Louis Humane Society.

As a retired Ford Motor Co. engineer, Addis receives a pension from Ford, plus a veterans' disability pension from military service and Social Security. He makes about $4,000 a year working 30 minutes twice each weekday as a school crossing guard, which he says he does mostly for the exercise.

He splurges on good whiskey and custom-made clothes but will walk miles to avoid paying for parking, and he drives a 10-year-old Mercury Villager.

"I'm comfortable, not affluent," said Addis, who says animals' unconditional love motivated his giving. "I really don't need the money."

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