Gifts of Retirement Assets
Goal: Avoid the twofold taxation on
IRA or other employee benefit plans
Benefit: Lets you leave your family other assets that carry less tax liability
Contributions to retirement plans can provide an excellent opportunity for growth as they are invested tax-free. The earnings are taxed when they are withdrawn, but this has allowed more dollars to be invested for more growth. Additional savings can occur if the recipient is in a lower tax bracket when the funds are withdrawn (for example, during retirement) than when the investments were growing.
Norman and Ruth had often put some of their savings into the stock market. They were also employed by companies that had 401k plans. They kept investing and the value of their plans kept growing. They had long been active in charitable giving - One of their first charitable gifts had been a gift of appreciated stock.
NNorman: "Our first experience was giving several hundred shares of a stock that had more than doubled in value. We needed some help that year with our tax situation and that gift was a great idea. That was a number of years ago while we were still working. Since then, our tax-sheltered retirement plans kept growing and we just recently rolled them into our IRA. It's all grown beyond our wildest dreams."
Ruth: "But after we're gone, taxes will eat up so much of it. Not that we need it all, but we were hoping to get more value out of it."
Norman: "We recently sat down with our attorney to look at our overall financial plans to make sure we had set up our affairs to best suit our needs. Knowing how much we would like to help others, our attorney suggested we consider making charities a beneficiary of our IRA rather than make gifts directly from our other assets. This will enable us to leave more for for our kids."
Ruth: "Protecting the future for our kids and knowing we're making a difference in other peoples' lives - it feels good!"
However, careful planning concerning the withdrawals from retirement funds needs to be done. Not only is there a potential income tax burden, but if there is a balance in your retirement account at your death, there may be estate taxes as well. Estimates are that taxes could eat up as much as 70-75% of retirement assets under certain circumstances.
Another aspect to gifts from retirement accounts is to take advantage of a recent law allowing for distributions from a retirement plan during your lifetime. There is more information regarding IRA rollovers.
Using qualified retirement plan funds is an excellent source of assets to fund bequests. By designating North Central Florida Hospice Inc d/b/a Haven Hospice as a beneficiary (it can be a contingent beneficiary after the death of a spouse - see sample bequest language) funds pass to North Central Florida Hospice Inc d/b/a Haven Hospice free of taxes. It is possible to set up the beneficiary as the recipient of the entire remaining funds in the account or establish a percentage to fund the bequest.
Please note - the designation of any charity as a beneficiary of retirement fund assets cannot be simply written in your will or trust. The charity must be designated as a beneficiary of the retirement plan and be listed on the plan�s beneficiary form.
Everyone's personal circumstances are different, so please consult your tax advisor concerning the use of qualified retirement funds. We would be glad to make suggestions that could be effective in accomplishing you and your family's needs and benefit Haven as well.
We would like to help make certain your intentions are executed accordingly. For more information about the importance of having a will, please email or call the Vice President of Development, Sharon A. Jones, at 352 379-6226. We are happy to answer questions and offer suggestions confidentially based on your personal circumstances.