Many donors want to support the charities they love but fear not having enough income in their retirement. The answer may be a Life Income Plan.

What is a Life Income Plan?

A Life Income Plan is technically a Split-Interest Agreement between a charity and a donor. After the donor gives assets to the charity, the charity invests them and agrees to pay the donor or beneficiary an income for the rest of his or her, and/or another beneficiary’s lifetime. The donor receives a charitable deduction for the estimated portion of the gift that will remain for the charity after the income has been paid to the donor(s).

Examples of Life Income Plans include Charitable Gift Annuities, Pooled Income Funds and Charitable Remainder Trusts. American Bible Society administers all three of these types of agreements, which can yield significant tax benefits for the donor. In addition to a tax deduction, they can also help donors avoid capital gains taxes if funded with appreciated assets like stock or real estate. Unfortunately, these gift agreements can not be funded with an IRA Charitable Rollover.

What is an IRA Charitable Rollover?

Congress passed The PATH Act (Protecting Americans from Tax Hikes) of 2015 on December 18, 2015 which permanently allows individuals over the age of 70 ½ to make direct contributions to 501(c)3 charities from their IRAs. This law recognizes transfers up to $100,000 annually as meeting all or part of the “Required Minimum Distribution” and, best of all, will not be taxed as long as the distribution is a direct transfer from the IRA account to the charity. No charitable deduction is received, but no income tax is paid on the transfer either.

While current law does not allow these Rollovers to be used to fund Life Income Plans, a donor could still withdraw IRA funds which would be taxed as regular income. The donor can then establish a Life Income Plan with the proceeds. The charitable deduction may offset a portion of the IRA distribution taxed as income. But soon, this could change for the better. New legislation has recently been introduced in Congress, which would allow tax-free transfers from IRAs to Life Income Plans.

To learn more about receiving retirement income while supporting American Bible Society’s eternal mission, contact one of our Regional Advisors by calling 800-549-3328 or visiting our “Contact Us” page.