After the initial shock of owing taxes on the traditional IRA to Roth IRA conversation had somewhat worn off, John and Mary began to think about ways in which they could offset the tax hit they took. Since both John and Mary had charitable intent and wanted to support EWTN, they began to think about establishing a more significant Charitable Gift Annuity than they had originally considered. A charitable gift annuity is an arrangement between a donor and a non-profit organization in which the donor receives a regular payment for life based on the value of assets transferred to the organization. After the donor's death, the assets are retained by the organization. A charitable gift annuity may be funded primarily with cash or appreciated securities.
As is the case whenever reporting income for tax purposes, there can be a variety of ways to offset or reduce the amount of tax due. The income from a Roth conversion is no exception. Tax credits, losses, charitable gifts, other deductions, or carry forwards can serve to reduce or eliminate the tax bite due to the conversion.
Deductions can offset the Roth conversion income on a dollar-for-dollar basis up to the maximum allowed for income tax purposes. For this reason, charitable gifts can be an especially flexible tool that can help minimize taxes that would otherwise be due, while at the same time fulfilling one's charitable goals.
This story has a happy ending and turned out to be mostly a win-win for the parties involved. However, it does bring to light the importance of understanding and communicating the specifics of estate planning with retirement assets, making sure the right questions are asked and sound professional advice is sought from multiple perspectives. John and Mary ended up establishing the more significant Charitable Gift Annuity for the benefit of EWTN and will receive a guaranteed income stream for their lives. They also helped to offset their tax hit, provided an income source for their day-to-day living expenses, and left a residuum (remainder) to EWTN after their lifetimes. Throughout the gift planning process, John and Mary reiterated how grateful they were to EWTN for the high-quality Catholic programing that they receive each day. They also hope through their gift to pass on their Catholic values to the next generation of EWTN viewers and listeners.
If you would like to learn more about establishing a Charitable Gift Annuity that will one day benefit EWTN, please contact Legacy Giving Advisor Ryan Flood at (205) 569-2674 or at firstname.lastname@example.org.
A special thanks to John and Mary, EWTN viewers from Colorado, for encouraging me to share their story with you.