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they are withdrawn, but this has allowed more dollars to be invested for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tax bracket when the funds are withdrawn (for example, during retirement)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
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 beneficiary after we're gone knowing how much we would like to help others."
Ruth: "Protecting our future
and knowing we're making a difference in other peoples' lives - it feels
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 Goodwill Industries-Suncoast, Inc. as a beneficiary
(it can be a contingent beneficiary after the death of a spouse - see sample bequest language) funds pass
to Goodwill Industries-Suncoast, Inc. 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 Goodwill Suncoast as well.
Click here to return to Bequests, to the Legacy Giving home page, or to the Quick Guide to Legacy Gifts.