Gifts of Retirement Plan Assets

Invest in Your Community Through Your Retirement Account

A retirement plan is one of the best types of assets to transfer to a charity because it reduces taxable income. Most assets an heir inherits are free from income tax. However, an heir will pay income tax on disbursements from a decedent’s retirement plan such as a profit sharing plan, Section 401(k) plan or IRA. If you are going to make a charitable bequest, it is usually better to transfer the taxable assets subject to income tax to a tax-exempt charity — such as a community foundation — and to transfer the assets not subject to income tax to heirs.

It’s Never too Early to Plan – Did you know that retirement assets from your 401(k), 403 (b), IRA, Keogh, or other such account will be included in the total value of your estate at death for estate tax purposes? If left to a non-spouse beneficiary, these assets are not only subject to estate tax, but heir(s) will have to pay income tax as they withdraw the funds. To avoid this “double taxation”—55% effective January 1, 2011—simply name a charitable fund of The Greater PineBelt Community Foundation (PineBelt Foundation) as the beneficiary of your retirement plan and use other assets not subject to income tax to make gifts to your heirs.

Benefits of Giving through your Retirement Account

  • Gives you the satisfaction of making a gift today that will invest in your community and favorite charities for the future
  • You can give all or a portion of your retirement account
  • If you transfer money from an IRA to one of our charitable funds, you will not have to pay estate or income taxes on the money accumulated tax free during your lifetime.
  • The estate can take a charitable deduction for the amount left to charity. For example, when a $1 million IRA goes to charity and the total estate is worth $8 million, there’s a $1 million estate tax deduction and the estate tax is applicable only on the remaining $7 million.

 

Ways to Give through your Retirement Account

#1 – Beneficiary Change – Simply change the beneficiary designation on your account to the PineBelt Foundation for the benefit of your community or other favorite charities for all or a portion of the account balance. Favorable new IRS rules have made this option more attractive without increasing your required minimum annual payments at retirement.

#2 – Contingent Beneficiary – Naming the PineBelt Foundation as a contingent or secondary beneficiary for the benefit of your community or other favorite charities gives your heirs the option to decline their right to receive your account assets should they decide not to pay the potentially heavy taxation on the account as-sets.

#3 – Income for Family – Your retirement account’s value may be preserved and income provided to your family with the use of a Charitable Remainder Trust. The use of this trust could greatly reduce your federal estate taxes. Additionally, no income taxes would be payable on your retirement account assets.

#4 – Asset Replacement – In some situations, it may benefit your family to name the PineBelt Foundation as the beneficiary of your retirement plan. A newly purchased life insurance policy would replace the value of your retirement plan that would have gone to your family, without the tax consequences.

Please click here for a brochure on investing in your community through your Retirement Account.

For more information please contact your Professional Advisor or Theresa Erickson, Executive Director at contact@PineBeltFoundation.org or call 601.583.6180