For anybody 70.5 years or older, an IRA is a great option for making gifts to the Lord’s work at church, a local WELS-affiliated ministry, and/or a WELS area of ministry.
Typically IRA distributions are taxable, but, for anyone 70.5 or older, qualified distributions from an IRA to charity are free from federal and potentially state income tax. Consider directing IRA distributions to WELS to save on taxes, then using the cash you would have given for other needs. The rollover to charity counts toward satisfying the donor’s required minimum distribution.
You and your spouse, assuming he or she is 70.5 years or older and has an IRA, may each make direct transfers of up to $100,000 per year to charity. Rather than being treated as taxable income, direct transfers to charity are wholly excluded for federal income tax purposes. These transfers do not generate a charitable deduction, but the relief from tax impact is often more advantageous. Consult your tax or financial advisor to determine the most appropriate gift assets for your situation.
Contact the investment firm that handles your IRA to request a direct transfer of IRA assets to a WELS ministry. They typically provide the appropriate paperwork (or you can download an authorization letter template below). To ensure that your IRA transfer is not taxable, the check must be made payable to the charity, not to you personally.
You can give to multiple WELS designations by directing your transfer to WELS Foundation. WELS Foundation will distribute funds to the ministries per your instructions and provide you with the proper acknowledgment.
If interested, talk to your financial planners and your local WELS Christian giving counselor to learn more.
Update: The SECURE Act, which went into effect on January 1, 2020, changes many of the rules governing retirement plans, including several provisions relevant to making IRA qualified charitable distributions. To learn more, click to read the article below, “The SECURE Act and Qualified Charitable Distributions.”