LUTHERAN COMMUNITY FOUNDATION

Roth IRA Conversion Opportunities through Charitable Giving

201000036

2010 ROTH CONVERSIONOPPORTUNITY

• Do you have clients who want to help their congregation or other charities?

• Does the client have a traditional IRA?• Would your client benefit from a Roth IRA?

This is the year to act on charitable intentions to facilitate the Roth.

2010 ROTH CONVERSIONOPPORTUNITY

Starting with the client wanting to convert to a Roth.• Would your client prefer that the amount of tax obligation

create a charitable gift instead of going to the government in the form of taxes?

ROTH CONVERSION

YOUR IDEAL MARKET

• Client who has a traditional IRA and wants to convert to a Roth.

• Client is charitably minded, plus:– Would like to create a streamlined charitable giving plan.– Is interested in endowing a favorite charity or church.– Would benefit from lifetime income.– Has a highly appreciated capital asset, real estate, family

business, securities.– Has family and an interest in passing along charitable

tradition.

ROTH CONVERSION

MINIMIZE TAX LIABILITY

Donor• Retired engineer has $550,000 in a traditional IRA.Goal• Convert to a Roth in 2010. Would like to minimize the tax

liability and support his favorite charities. Solution• Converted $300,000 of traditional IRA to Roth.• Uses $30,000 of other assets to create an LCF donor advised

fund.• Receives a $30,000 charitable income tax deduction, which

partially offsets the tax liability for conversion.• Member makes annual grant recommendations from his LCF

fund to his favorite charities – he decides when and how much to grant, and has the option of remaining anonymous to the charity(ies).

ROTH CONVERSION

CREATE LIFETIME INCOME

Donor• Couple, 56 and 58, with a $350,000 traditional IRA. Owns

appreciated stock FMV $100,000 and basis of $10,000.Goals• Convert to a Roth in 2010 and create a stream of income. Solution• Opportunity to convert to a Roth as part of plan.• Create a flexible deferred gift annuity with $100,000 stock.• Members decide when to start income, sometime between age

70 and 80 for older spouse, rates will range from 8.4% to 15%. • Gift annuity creates $24,631 charitable income tax deduction.• Members set up LCF donor advised fund to permanently

benefit favorite charities at the end of their lives.

ROTH CONVERSION

COMBINATION ROTH AND TRADITIONAL Donor• Retired doctor has $800,000 in a traditional IRA.Goal• IRA beneficiaries are 90% to his children; 10% to his church. Solution• Opportunity to convert to a Roth as part of plan.• Don’t convert the 10%, which will go tax free to the church.• Converting the charitable portion would result in

unnecessary taxes paid. • Donor names the LCF as a 10% beneficiary of the traditional

IRA.• Upon his death, IRA proceeds will go to his donor advised

designated fund to benefit the church with an annual grant.

ROTH CONVERSION

INVOLVE THE FAMILY

Donors• Couple with children and grandchildren.• Traditional IRA of $620,000.Goals• To convert to Roth IRA and to name children as beneficiaries.• To encourage a tradition of giving within family.Solution• Couple establishes donor advised fund with gift of securities.• Charitable deduction offsets Roth conversion.• Each year, couple meets with family to select charities for

grants from their donor advised dynamic fund.• LCF staff assists by researching family’s areas of charitable

interests for suitable benefiting charities.• Fund will continue for generations.

ADVANTAGE OF 2010 ROTH CONVERSION

• The 100K MAGI limitation expires in 2010.• Only in 2010 can you defer the tax liability:

– 50% of tax liability paid in 2011.– 50% of tax liability paid in 2012.– Must elect out of this option.

CAUTION: Tax rates might increase in 2011 or 2012.Consider state tax rules.

ROTH CONVERSION TIMING TIPS

• Ensure that the deduction will be available at the time income is recognized.

• Be mindful of how the charitable deduction will affect the client’s tax position if they choose to re-characterize the conversion.

• Example: – Client converts in 2010 but defers income recognition until 2011 and

2012. – Make sure that the timing of the deduction will cover the tax liability.– Consider delaying the gift until after October 15, 2011, which is the

last day to re-characterize a conversion that occurred in 2010.

ROTH CONVERSION TIMING TIP

• Example: – Client converts in 2010 and elects to recognize

income in 2010 tax year. – Client has until October 15, 2011, to re-characterize.– Consider delaying the gift until the end of 2010 tax

year.

ROTH CONVERSION RESOURCES

Thrivent Tools• Roth Conversion Calculator• What If Calculator• RMD Calculator

LCF Tools• Gift Calculator• Gift Story• Giving Options Tool

ROTH CONVERSIONSWHAT NEXT?

Identify suitable prospects from your client base.

Contact an LCF gift planner for assistance at:– 800-365-4172– www.TheLCF.org

HOW DO YOU WANT TO CHANGE LIVES AND SPREAD JOY?

Thank you! The Lutheran Community Foundation is a public charity that serves donors and the community through

charitable funds, and is independent of Thrivent Financial for Lutherans and its financial representatives.