Three Insights for Individuals on IRA Transfers

  • Charitable IRA Transfers: It is yet uncertain if this year the Congress will extend the individual retirement account (IRA) charitable transfer provision, which, if likely, will not happen before November election. The charitable IRA transfer allows individuals to transfer directly from IRA to charity while leaves it aside from counting as income. Past years’ charitable tax break has lowered adjusted gross income and receive special tax treatment for charitable deduction. It would be wise to wait till Congress acts before individuals take steps.
  • Adding Co-owner to Paper Bond: To transfer a U.S. paper bond by adding a co-owner, the paper bond needs to be exchanged for an electronic one, which typically takes around three weeks. Thereafter, an authorized co-owner will have the right to request redemption on the bond. A co-owner won’t be responsible for the tax until a 1099 tax form that reports the income is filed.
  • Roth IRA v. Traditional IRA: While Roth IRA functions as a way to pass down wealth to next generation after retirement, there is no additional requirement for making such contribution. Nor is there any restriction on contribution to a Roth IRA and withdrawal from a traditional IRA. Both of the transactions are taxable.

See Karen Damato, “Rules on IRA transfers to Charity Are in Limbo”, The Wall Street Journal.

Posted by Jiaqi Wang, Associate Editor, Wealth Strategies Journal.

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