Donating retirement plan assets could be the most cost-effective gift you can make.
Did you know that your retirement plan assets are facing double taxation? If you leave the assets to your heirs, you’ll generate “income in respect of a decedent.” So not only may the amount be diminished by estate taxes, but the recipient also must pay income taxes on it!
If you can make other provisions for your family, there’s a better option for your retirement plan assets - a charitable gift.
To implement your wishes, simply advise the plan administrator of your decision and sign whatever form is required. For an IRA or Keogh plan you administer personally, notify the custodian in writing, and keep a copy with your valuable papers.
Bill is considering adding a charitable bequest to his will, with the residue of his estate passing to his children. Instead, he should name the charitable organization as the beneficiary of his profit - sharing account. Then the death benefit passing to the organization will not only qualify for the estate tax charitable deduction but will also pass free of any income tax obligation. His children will benefit from this change because, rather than getting the profit sharing account proceeds that are subject to income tax, they will receive other assets of his estate that are free of income taxes.
- Naming us the primary beneficiary avoids all income and estate taxes
- Partial savings when you give us a specific amount before giving the family the remainder
- Naming us the contingent beneficiary allows for greater flexibility