Goal: Avoid the twofold taxation on
IRA or other employee benefit plans
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 The earnings are taxed when they are withdrawn, but this has allowed more dollars to be invested for more growth. Additional savings can occur if the recipient is in a lower tax bracket when the funds are withdrawn (for example, during retirement) than when the investments were growing.
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 McLeod Health Foundation as a beneficiary (it can be a contingent beneficiary after the death of a spouse - see sample bequest language) funds pass to McLeod Health Foundation 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 McLeod Health Foundation as well.
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For more information or a confidential discussion of your charitable options, please email or call the Development Officer, Roxanna Tinsley, at (843) 777-2694.