Everyone who set up and contributed to an IRA during their working years are obliged to begin withdrawals from these accounts after the of age 70. Many IRAs were set up so that the tax was deferred; in other words, taxes would be paid at the time the funds were withdrawn.
A Challenge. For those who have other sources of income, these required IRA withdrawals are not needed, yet IRA account holders are obliged to take the money and pay the taxes anyway.
A Solution. You can choose to give these dollars free of the tax obligation directly to a 501(c)(3) nonprofit such as Patronato. In other words, you paid no tax when you invested the money, and you’ll incur no taxes when the money is gifted to a charity. For this type of charitable gift to qualify free of the tax obligation, you need to instruct the manager of your IRA account to make a gift directly to the charitable entity of your choice.
You cannot withdraw the money yourself, deposit the funds into your bank account, and then write a check for the gift because the IRS applies taxes when you personally withdraw funds, regardless of what you do with those funds.
According to philanthropy expert Clyde Kunz, if you plan to leave gifts to a charity after you have provided for your family through your estate plan, IRA funds are the obvious ones to donate for similar reasons. When the charity of choice is named as beneficiary of IRA accounts, the money transfers tax free. If an IRA transfers to a family member, it can create a sizable tax burden for that family member in the year the bequest is received.