Gifts of Retirement Assets
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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they are withdrawn, but this has allowed more dollars to be invested for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tax bracket when the funds are withdrawn (for example, during retirement)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 CSUB as a beneficiary (it can be a contingent beneficiary after the death of a spouse) funds pass to CSUB 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 CSUB as well.
Click here to return to Wills and Bequests.
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
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