Recent changes in the Secure Act are prompting an increasing number of your clients to consider Roth conversions. You are in a unique position to help your clients lessen the tax impact of the conversion and enhance your relationship as trusted advisor all while adding long term AUM.  It’s a win-win situation.

Problem: How to handle the tax liability generated when converting a traditional IRA to a Roth IRA?

Solution: Your client contributes assets to a donor advised fund at iGiftFund. The charitable deduction resulting from the gift is used to offset the federal income tax liability generated from the Roth IRA conversion. From then on, both the Roth and the DAF grow tax-free.

Here is how the tax-free Roth conversion works:

You establish a corporate non-profit account on your platform in iGiftFund’s name, for the benefit of (FBO) your client’s DAF, funded by your client’s tax-deductible charitable contribution. The charitable investment account is set up FBO the client’s DAF, right alongside the client’s converted Roth account – and you manage both funds. The income tax deduction on the DAF contribution tends to offset the increased federal tax liability resulting from the Roth conversion.

In summary, your client realizes the benefits of the converted Roth account and the following additional benefits:

  1. The income deduction for the DAF contribution tends to offset federal taxes on the Roth conversion.
  2. There are no capital gains tax on gifts of appreciated assets to a DAF.
  3. Neither the Roth nor the DAF require annual distributions.
  4. Assets in the donor advised fund are not subject to estate taxes but assets in the Roth are subject to estate taxes.
  5. Assets in both the Roth and the DAF grow tax-free.
  6. You manage assets in the Roth and the DAF on your familiar custodial platform.

About iGiftFund

iGiftFund is an IRS-recognized, independent, public charity that sponsors donor advised funds.  Its mission is to inspire donors to create, preserve and distribute their philanthropic legacy and to make a truly remarkable impact on the lives of others, including the donor.

With the hallmarks of simplicity, accessibility and low administrative fees, iGiftFund sets the standard of excellence in the industry and distinguishes itself from the large, national commercial and independent DAF sponsors. Based in Hudson, Ohio, iGiftFund works nationally with donors and with financial advisors on their familiar investment platform, in open architecture. iGiftFund’s administrative fees are the most competitive in the industry, starting at just 45 basis points on the first $500,000 tier.