As regular readers of my articles know, I’ve enjoyed rock and roll music since my teens and am pleased to be able to return to the genre for another title. Perhaps it’s a stretch to go from Roll Over Beethoven to IRA rollovers but I hope you’ll allow me to try.

I have expressed my cynicism about politicians before. It seems to me that the desire to be reelected very often takes precedence over meaningful public service. Congress didn’t seriously consider the 2010 tax law until December, finally passing it on the 17^th. Those of us who plan for ourselves and others had to wait until then to learn the rules under which we’d be operating during the almost finished year. This made for an unnecessarily hectic last two weeks of the year for financial professionals.

Among the provisions of the bill is the extension of a useful planning benefit available to those retirees who must take Required Minimum Distributions. But first, a bit of history. US workers have been allowed to deduct contributions toward their own retirement via IRAs since 1974. In addition, most people consolidate their accounts by rolling other tax-deferred investments such as 401(k) and 403(b) plans into IRAs upon leaving the workforce. All of these retirement assets have grown tax-deferred over the years, so the IRS requires that a minimum amount be withdrawn (thus subject to taxation) beginning at age 70½. The amount of an RMD Is determined using two numbers. The first is the total value of all IRAs at the previous year-end. The second is the number of years statistically remaining in a person’s life, a factor provided by the IRS. The value is divided by the factor and the quotient is the distribution. Since these assets have never been taxed, the distributions become additional income in the year they are taken. This could move the recipient into a higher tax bracket, raise Medicare premiums and/or make a larger portion of Social Security income taxable.

Now, back to the law. For those retirees whose income needs are otherwise met and who are of a charitable bent, the December 17^th law extends the life of a valuable planning tool. Retroactively for 2010 and through the end of 2011, required distributions up to $100,000 may be rolled over directly to a charity. While no charitable deduction is allowed, neither does the distribution count as income. Since many people in their 70′s no longer itemize, this can be a very tax-efficient strategy for making gifts whether previously contemplated or newly conceived. This provision is carried over intact from its previous iteration, the only difference being that 2010 gifts may be made until January 31^st of 2011. The process is about as simple as taking a normal distribution, basically requiring the donor to advise the custodian of his or her wishes. The donor should also let the recipient know what’s going on, as most custodians will not reveal the source of such funds without specific permission. The charity will send the usual gift acknowledgement which serves to confirm that the RMD has been taken. There are restrictions regarding contributions to donor-advised funds held by public charities and to private operating foundations but, for most people, this provides a chance to do some good at a reduced cost.

A direct IRA contribution isn’t the only tax-efficient method of making a gift to a church or charity. Individuals of any age owning appreciated shares of stock have another option. A gift of stock can be made directly to the charity rather than selling it then making a donation of cash. The gift’s value for tax purposes is the stock’s value on the date of transfer but the donor does not have to pay taxes on the gain. This doesn’t work with mutual fund shares as those are taxed every year.

Jalene and I consider ourselves planners, not reacters, so we will be helping our clients develop their 2011 gifting strategies early this year using these and other approaches. Those of you who are not clients will want to contact your own advisors to discuss your specific situation. Local foundations like the Heritage Fund and the CRH & BCSC Foundations are equipped to receive such donations. In fact, at this point, I doubt if there’s a church or charity anywhere in the country that cannot accept these types of contributions.

How did I get from IRA rollovers to Roll Over Beethoven? Well, both are examples of something from the past that was valuable enough to revive. Artists from the Beatles to Iron Maiden have re-released Chuck Berry’s 1956 song and Congress decided to extend a valuable tax benefit. We can only hope that our lawmakers will continue to make this planning tool available and that Chuck, still touring at eighty-four, will continue to receive royalties for his song as it is performed by other artists.