Your Money

New Tax Act Creates Giving Opportunity

By William R. Blumer, J.D., LL.M, CELA

Americans love to help others in need. It's a unique feature of our society about which we all should feel very proud. And for many, figuring out how to maximize the impact of their giving is an enjoyable challenge. Happily, the new tax law enacted by Congress on December 17, 2010 gives donors a great tool – charitable gifts from an IRA. Historically, direct gifts were not allowed from IRAs. Instead, donors had to withdraw money from their IRAs, pay income tax on the withdrawal and then give the net proceeds to charity. Although an income tax deduction for the gift helped some offset the tax hit on the IRA withdrawal, it rarely offset it completely. And for those who don't itemize their deductions, there was nothing to soften the tax blow on the IRA withdrawal. That's why the current law allowing direct gifts from IRAs is so important.

If you stop and think about it, a traditional IRA is not really worth as much as your account statement suggests. That's because the account balance does not reflect the income tax that has to be paid when money is withdrawn from the IRA. For example, a $100,000 IRA may lose 25% of its value to income tax when it's withdrawn. In essence that $100,000 IRA is really only worth $75,000. But what if there was a way to avoid the tax and make the IRA really worth $100,000?

Organizations like Berks Encore are tax exempt. Under the new tax law, you can transfer money directly from your IRA to organizations like Berks Encore and the entire gift is free from income tax. Berks Encore enjoys the full value of your gift, you pay no income tax at all and considering the example above, you convert a $75,000 gift into a $100,000 gift. It's a win-win for you and Berks Encore. Even the government wins because your support for agencies like Berks Encore greatly reduces the need for government grants and bailouts to fund badly needed social services like the ones Berks Encore provides.

Of course, there's a limit to the government's generosity. The tax law limits direct IRA gifts to charity to no more than $100,000 per person, per year and the law is only in effect for 2010 and 2011. But for a married couple this could translate into a total of $400,000 in tax free gifts from IRAs in 2010 and 2011.

For people who really enjoy leveraging their gifts to maximum tax effect, making charitable gifts from their IRAs is one of the most tax efficient strategies imaginable. Really the choice is quite clear – withdraw money from your IRA and pay a big chunk of it to the IRS is taxes or use it to shape Berks Encore's future with no income tax cost at all. That's a pretty easy choice.

For more information about making a donation, please contact LuAnn Oatman, Berks Encore's CEO/President, at (610) 374-3195, x222.

William R. Blumer, Esquire, is a shareholder in the Wyomissing law firm of Leisawitz Heller. In addition to being a certified elder law attorney, Bill holds an advanced law degree is taxation from the Villanova University School of Law. He counsels the firm's clients on a variety of estate and charitable planning strategies and is a long-standing volunteer for Berks Encore.

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Online Retirement Estimator Available In Spanish

Social Security, which has a wealth of information in Spanish at www.segurosocial.gov, has launched its first interactive online service in Spanish: the Retirement Estimator. To publicize the website and the new Spanish-language service, Social Security has enlisted the help of the widely popular and well-respected host of Sábado Gigante, Don Francisco.

"I ask my many friends to go to www.segurosocial.gov, not only for themselves but also to help their loved ones," said Don Francisco. "There is a lot of great information there. Estimating your benefits and learning about Social Security online in Spanish is so easy." (Watch a short video with Don Francisco at www.segurosocial.gov/calculador.)

The Retirement Estimator is interactive and allows the user to compare different retirement options by changing retirement dates or expected future earnings. It protects the user's personal information by providing only retirement benefit estimates — it does not show the earnings information used to calculate the benefit estimate, nor does it reveal other identifying information. In the University of Michigan's American Customer Satisfaction Index (ACSI), the Retirement Estimator beat out top consumer online sites in the public and private sectors.

To learn more about the Retirement Estimator in Spanish, read our publication online at www.socialsecurity.gov/espanol/10516.html.

"The Spanish-language Retirement Estimator and the other information available on www.segurosocial.gov will help us provide a broader audience with important information they need to plan for a secure retirement," said Michael J. Astrue, Commissioner of Social Security. "The Retirement Estimator is the first of our online services available in Spanish, but we are not stopping there. We are working to make our online retirement application and Medicare Extra Help application available in Spanish in 2011. Until then, visit www.segurosocial.gov to estimate your benefits and learn more about Social Security."

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Estimate Your Future Social Security Benefits

Social Security recently introduced a new "Retirement Estimator" at www.socialsecurity.gov. Getting a personalized online estimate of your future retirement benefits is now easier than ever before.

The online Retirement Estimator is a convenient, secure and quick financial planning tool that lets workers calculate how much they might expect to receive in Social Security benefits when they retire. The attractive new feature of this calculator is that it eliminates the need to manually key in years of earnings information. It's so easy to use.

Visit www.socialsecurity.gov/estimator. To get an estimate, you'll need to enter your first and last name, date of birth, Social Security number, mother's maiden name and place of birth. If the information matches our records, then you can enter an expected retirement age and future wages. The Estimator combines this information with the information that we have on record, including your yearly earnings, to provide a quick and reliable online benefit estimate.

To protect your privacy, only the final retirement estimates are given to you online. The Retirement Estimator does not show your earnings record information on which the final benefit estimate was calculated. And it does not reveal any personal information, such as your address, earnings or other information, that could lead to identity theft.

The Estimator also will let you create "what if" scenarios. You can, for example, change "stop work" dates or expected future earnings to create and compare different retirement options.

When you visit our website at www.socialsecurity.gov to see the new Retirement Estimator, take a few minutes to become familiar with our many other online services – including applying online for Social Security retirement and disability benefits.

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Energy Assistance Program

The Low-Income Home Energy Assistance Program (LIHEAP) helps low-income families pay their hearing bills LIHEAP is a grant. You do not have to repay it. To receive help you don't have to be on public assistance. You don't need to have an unpaid heating bill and you can either rent or own your home.

LIHEAP offers both cash and crisis grants. Cash grants help families pay their heating bills. The grant payment is sent directly to your utility company or fuel provider, and it will be credited on you bill. Applications were available on November 1, 2010.

Crisis grants help households who have an emergency and are in immediate danger of being without heat. Emergency situations include a fuel shortage that may leave you without heat, having utility service shut off or having broken heating equipment or leaking lines. Applications for Crisis Grants were available as of January 3, 2011.

You may qualify for a LIHEAP grant if your income is $17,328 for a single person or $23,312 for a household of two persons.

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