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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 The earnings are taxed when they are withdrawn, but this has allowed more dollars to be invested for more growth. Additional savings can occur if the recipient is in a lower tax bracket when the funds are withdrawn (for example, during retirement) than when the investments were growing.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.

Norman: "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. Also, our tax-sheltered retirement plans kept growing and just recently we rolled them into our IRA. It's grown beyond our wildest dreams."

Ruth: "But 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. Our attorney suggested we consider making a charity a partial beneficiary knowing how much we would like to help others."

Ruth: "Tax benefits for our estate, protecting our future, 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.

Using qualified retirement plan funds is an excellent source of assets to fund bequests. By designating Big Brothers Big Sisters of Tampa Bay, Inc. as a beneficiary (it can be a contingent beneficiary after the death of a spouse - see sample bequest language), funds pass to Big Brothers Big Sisters of Tampa Bay 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.

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 Big Brothers Big Sisters of Tampa Bay as well.

Click here to return to Wills and Bequests.

For more information or a confidential discussion of your charitable options, please email or call Dawn Kuhn, the Vice President for Individual Giving, at (727) 687-9190.

Please note, individual financial circumstances will vary. The information on this site does not constitute legal or tax advice. Donor stories and photographs are for purposes of illustration only. As with all tax and estate planning, please consult your attorney or estate specialist. All material is copyrighted and is for viewing purposes only. Use of this site signifies your agreement with the terms of use. The content in this Planned Giving section has been developed for Big Brothers Big Sisters by Future Focus. Please report any problems to section webmaster.

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Tampa, FL 33634