Gifts of Retirement Assets
Contributions to retirement plans can provide an excellent opportunity for growth as they grow tax-free, meaning that the growth or earnings are not taxed annually but can continue to grow. The earnings are taxed when they are withdrawn, but this has allowed more dollars to be invested for more growth. Additional savings can occur if the recipient is in a lower tax bracket when the funds are withdrawn (for example, during retirement) than when the investments were growing.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 non-profit a partial contingent 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 75-80% of retirement assets under certain circumstances.
Using qualified retirement plan funds is an excellent source of assets to fund bequests. By designating West Virginia Public Broadcasting as a beneficiary (it can be a contingent beneficiary after the death of a spouse) funds pass to West Virginia Public Broadcasting 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 the station as a beneficiary of retirement fund assets cannot be simply written in your will or trust. The station must be designated as a beneficiary of the retirement plan.
There are other strategies in using retirement fund assets to fund charitable gifts. For example, qualified retirement fund assets may be placed in a charitable remainder trust by using a testamentary trust to provide for children or a spouse. There may be estate tax savings as a result.
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 West Virginia Public Broadcasting as well.
Return to Wills and Bequests.
Please note: individual financial circumstances will vary. The information on this site does not constitute legal or tax advice. As with all tax and estate planning, please consult your attorney or estate specialist. All material is copyrighted and is for viewing purposes only. The content in this Planned Giving section has been developed for West Virginia Public Broadcasting by Future Focus.