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Using a PIF to Offset Taxes on a Roth Conversion

Thursday, December 7, 2023
Highlights Historical

One popular technique in financial planning circles is to convert an IRA to a Roth IRA, so that the IRA participant will not have to pay income taxes on distributions from the Roth IRA in later years. However, the participant in a Roth IRA must typically pay substantial income taxes, since the IRA distribution (before it goes into the Roth) is taxable at ordinary income tax rates. One option is to offset taxes due on the conversion by simultaneously making a gift to a pooled income fund (PIF). Not only does this reduce taxes, but it provides cash flow for life to the income beneficiaries of the PIF while (very importantly) benefiting charity!

Using a PIF to Transfer Wealth

Thursday, September 2, 2021

Normally, charitable planners view pooled income funds as a great financial planning tool during life, and not a vehicle to transfer wealth. This case study may alter that assumption! Contributing to a PIF allows our donor to benefit charity, avoid potential capital gains taxes, transfer wealth to younger generations, and receive lifetime cash flow.