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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are withdrawn, but this has allowed more dollars to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the funds are withdrawn (for example, during retirement)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 charity a partial contingent
beneficiary knowing how much we would like to help
provide for those in need."
Ruth:
"Tax benefits for our estate, protecting our future,
and knowing we're making a difference in other peoples'
lives - that's what it's about!"
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 the United
Methodist Foundation, Inc., North Carolina Conference
of The United Methodist Church as a beneficiary (it
can be a contingent beneficiary after the death of
a spouse) funds pass to the United Methodist 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 the United
Methodist Foundation as well.
Click
here to return to Wills and
Bequests.
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