Eye on Your Money, Feb. 5th, 2007

February 05, 2007

Time now for Eye on Your Money with Financial Advisor Bryce Matteson of the local Oppenheimer & Co. Inc. office. It's always nice to help someone and today we're doing just that with a follow-up on something we talked about during the holidays in December.

The information comes from new federal legislation called the Pension Protection Act of 2006. Believe it or not, some people have enough money and don't want any more - even if it's their own.

The Pension Protection Act may allow them to give money away tax-free and help their favorite charity at the same time. Here's how it works. Any money we put into an IRA is called a contribution. Uncle Sam allows us to invest the money tax-deferred -- not tax free -- until we start taking the money out. Taking money out is called a distribution and taxes are due on the amount taken.

Like it or not, at age 70 ÃƒÆ’Ã‚Æ’Ãƒâ€šÃ‚â€šÃƒÆ’Ã‚â€šÃƒâ€¦Ã‚â€œ we are forced to start taking money out of our IRA. It's called a required minimum distribution or RMD. Again, there are some who would rather not take the RMD because (a.) they don't need the money and (b.) they don't want to pay more taxes.

Here's where the Pension Protection Act of 2006 can help. For only two years -- last year and this year -- the Act allows us to donate up to $100-thousand-dollars to a charitable organization without first taking a distribution and paying taxes on it. The money goes directly from the trustee of your IRA to the charitable organization creating a potential win-win situation for both the donor and recipient. This is new and the IRS is still working on how the qualified charitable distribution will be reported on tax returns.

Neither Oppenheimer & Co. Inc nor Bryce Matteson provide tax or legal advice. You will want to consult with your legal or tax advisor to make sure the charity you have in mind is qualified to receive this distribution and whether the strategy will benefit you.

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