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when they are withdrawn, but this has allowed more dollars to be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is in a lower tax bracket when the funds are withdrawn (for example,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
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 partial beneficiary knowing how much we would like to
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
Using qualified retirement plan funds is an excellent source of
assets to fund bequests. By designating Providence Health Care Foundation, Eastern Washington
as a beneficiary (it can be a contingent beneficiary after the death
of a spouse) funds pass to Providence Health Care Foundation, Eastern Washington 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
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 Providence Health Care Foundation, Eastern Washington as well.
Click here to return to Wills and Bequests.