Making a Charitable Gift from Your Account
Retirement accounts are fast becoming a primary source of funding for charitable gifts. Tax-qualified retirement plans, Individual Retirement Accounts (IRAs) and the newer Roth IRAs all represent wonderful opportunities for charitable giving.
Tax-qualified retirement plans are often called “tax traps”. True, tax-qualified retirement plans and IRAs are excellent vehicles for accumulating retirement savings due to their tendency to accumulate rapidly. But once you retire, distributions from the accounts are generally taxed as ordinary income. Required minimum distributions increase each year after age 70 ½ which shrinks your tax-advantaged account—you must pay taxes, even if you don’t need the income at that time. The income taxes on distributions continue for a spouse or heirs who inherit your retirement accounts. Because retirement assets are subject to estate taxes and generation-skipping transfer taxes for heirs other than your spouse, the combination of these taxes can exceed 80%.
For these reasons, retirement accounts are an excellent asset to make a charitable gift from your estate. By designating a charity as the beneficiary of the retirement account, the charitable gift is deductible for estate tax purposes. A charity will not have to pay the income taxes otherwise due and will enjoy the full value of the gift. It is also possible a charitable remainder trust with retirement assets that will pay income to your heirs and eventually benefit Daemen.
It is also possible to make a lifetime gift through your retirement account or IRA. Generally, an income tax charitable deduction is available for the charitable gift which may offset the income tax generated by the distribution. In addition required distributions after age 70 ½ can create an unwanted tax burden. By using these required distributions to fund your charitable gift, you earn income tax deductions.
To make a gift from a retirement plan or IRA during your lifetime, simply request a distribution form from your plan administrator or IRA custodian and request the desired distribution amount. The gift can be sent directly to Daemen or through you first.
For estate gifts, these assets are directed by a separate beneficiary designation form, not by your Will. Simply request the appropriate form for changing or adding a beneficiary and indicate Daemen College, Amherst, NY as the beneficiary.
Note: It is generally not recommended that you list your estate as the beneficiary of retirement plan assets as this may have adverse tax implications.
The information in the Web site is not intended as legal advice. For legal advice, please consult an attorney.