Your IRA as a Charitable Bequest

An IRA can be one of the best assets to use for a charitable bequest. While normally an inheritance is exempt from income tax, distributions from an inherited IRA to the beneficiary are fully taxable. At your death, your children could be taxed on the distribution as much as 66 percent! Should an IRA achieve $1 million, total estate and applicable taxes could take the vast majority of these funds and leave little to benefit the family or any beneficiaries.

If you are planning to make a charitable bequest, consider leaving the taxable IRA assets to EDNF so your family will receive more of the other income tax-free assets (stocks, cash, real estate). The best way to do this is to name EDNF as the beneficiary on your IRA beneficiary forms; your will does not govern your IRA because it is a separate trust or custodial account that usually passes outside of probate. The beneficiary trust from is the most important document you will receive from the IRA administrator.

Pension Act of 2006

On August 17, 2006 President Bush signed into law new tax incentives for charitable gifts from donors that are 70 ½ or older. The Pension Protection Act of 2006 encourages financial support to charities across the nation. Under the new law, you can make a lifeti me gift from funds from your Individual Retire ment Account without undesirable tax consequences.

Even better, the gift may be made now, while you can see and enjoy the difference it will be for the Foundation.

The require ments for this type of gift include:

• Age of 70 ½ or older

• Your gift is less than $100,000

• The gift is made before December 31, 2007

• The gift is transferred directly from an IRA or rollover IRA

• The gift is made outright to a public charity with a 501 c 3 designation

How this works:

If and IRA contains $450,000 and a gift of $50,000 is made to the Foundation, that $50,000 avoids being taxed. No double dipping, this amount cannot be deducted as a charitable gift. It is always prudent to discuss all considered gifts with your tax professional, but this act provides an easy way to provide a gift to EDNF without tax complications.

Please contact EDNF, 213 368 3800 for more information and assistance.