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Covenant Trust serves as trustee for both Traditional IRAs and Roth IRAs.
Yes. Covenant Trust will accept funds rolled over from a Qualified Plan such as a 401(k) or 403(b), or a transfer from an existing IRA.
having someone else manage their investments. Covenant Trust does accept self-directed IRAs; however these accounts are charged the same fee as fully managed IRAs.
- As trustee of your IRA(s), Covenant Trust provides professional investment of IRA assets. Covenant Trust acts as a fiduciary for you, with the obligation to invest your money in only the very best products we can and to act only in your best interest.
- Covenant Trust is prudent in its investment approach. Our objective is to seek positive, long-term results at a risk level appropriate to your objectives. We are committed to servicing each account with individualized attention. Based on a questionnaire dealing with your goals, needs and risk profile, a portfolio allocation for your managed IRA is tailored for your particular situation.
- One or more IRAs can serve as part of your overall legacy plan, and provide options for using charitable beneficiaries with your IRA to offset other taxation issues.
- At the appropriate time, Covenant Trust will provide information on your Required Minimum Distribution (RMD).
When you name one or more charities as the beneficiary of your IRA (or Qualified Plans) the charity(ies) pay no income tax when they receive distribution of the assets.
If you name your spouse or other individuals as beneficiary, the income tax will have to be paid, unless they in turn name one or more charities to receive the assets at their death. If they do not name any charities, then their estate or non-charitable beneficiaries will have to pay the income tax.
Contact the Covenant Trust IRA department at 800-483-2177 or your local Financial Services Representative.
- If this is to be a direct rollover or transfer, you will be asked to send a copy of the latest statement from the assets you will be using to fund this IRA.
Once we have received your information, we will prepare an IRA Simplifier form and send it to you for signature. For Direct Rollovers and transfers, we will review the statement copy to verify the assets are eligible for transfer.
In December 2015, the U.S. Congress passed and President Obama signed into law the PATH Act of 2015 (Protecting Americans From Tax Hikes) which made Qualified Charitable Distributions permanent.
A Qualified Charitable Distribution (QCD) allows individual taxpayers older than 70½ years to donate up to $100,000 to eligible charities including colleges, universities, independent private schools, and ministries from their IRA tax-free.* This donation typically goes straight from the IRA to the charity.
How does a QCD offer advantages over taking an IRA distribution and then contributing all or a portion of the proceeds to charity?
For Traditional IRA owners who must take a required minimum distribution (RMD) from their IRA each year, the QCD provision is an opportunity to meet their RMD requirement while minimizing the effect on their taxable income; since the money goes directly to the charity, distributions made in this manner are not considered taxable income. Thus, by transferring part or all of your RMD to charity, you can effectively reduce your income tax while supporting your favorite charities.
Remember: If you make a tax-free transfer to a charity, you can’t take a charitable deduction for that contribution, too.
*Source: “IRA Charitable Rollover Is Now Permanent” — Charity Navigator Blog
No. Only individuals who are actually 70½ may make a QCD. A QCD done prior to the date a person turns 70½ doesn’t meet QCD requirements.
It is important to note that not every organization dedicated to philanthropic purposes will receive qualified charitable organization status, and therefore gifts to those organizations may not be deductible even if they are tax-exempt organizations. Some organizations that do not qualify for a charitable income tax deduction (of an individual) include private (grant-making) foundations, Donor Advised Funds and 509(a)(3) organization—or a ‘supporting organization.
If you are unsure if your donation qualifies for the QCD, or if you have any other questions about IRAs or charitable giving, contact your local Financial Services Representative. Also, please contact your tax advisor for information on how these ideas pertain to your individual situation.
Because ROTH IRAs do not have RMDs and distributions are not taxable anyway, in most cases, it would not make sense to use a ROTH IRA for a QCD. According to one source, “The only reason Congress included Roth IRAs as one of the two types of IRAs from which QCDs could be made was that in the case of certain contributions to a Roth by a donor, if the contribution was made less than five years before a distribution is taken, the amount distributed can be subject to a penalty tax. That tax is avoided if a QCD is made.”**
**PG Calc, February 2014
A QCD can be made from any IRA or individual retirement annuity except for the following:
- Simplified Retirement Account
- Simplified Employee Pension
At Covenant Trust, there is no minimum amount for an annual QCD per charity, but for a monthly distribution there is a $100 minimum.
If you decide to make a QCD from your IRA, contact your local Financial Services Representative or contact our IRA department at 800-483-2177. A form must be completed regarding the amount of the gift and information about the receiving organization. Once this form has been signed and sent to Covenant Trust, a check will be written in that amount to the organization. This check is typically sent directly to the charity, but you may request to have it sent to you so that you can forward it with a personal letter if desired.
NOTE: Failure to obtain a contribution acknowledgement from the charity that received the donation will invalidate the terms of a QCD.