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Patricia Bentz
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Retirement Plans

Giving Through Retirement Plan Assets


Most of us spend a lifetime trying to accumulate enough wealth in our IRAs or other qualified retirement plan assets to ensure our support from these funds for as long as we may live. However, few individuals actually end up spending every dollar in these plans before they die. Thus, it is important to name one or more beneficiaries to receive the remainder of your retirement plan assets at the end of your lifetime. 


Unfortunately, retirement plan assets make very poor assets to leave to your loved ones. If you leave your IRA proceeds to your daughter, for example, she must pay income tax on the total amount she receives. Additionally, depending on the size of your estate, the retirement plan assets you leave to your daughter may also be subject to estate tax. The combination of income and estate taxes could reduce the value of the retirement plan assets meant for your daughter by as much as 60–70 percent. To make matters worse, if you leave these assets to your granddaughter, the generation-skipping tax may also apply, further increasing the percentage of the gift consumed by taxes. 


Cash, securities, and real estate make much better assets to leave to your heirs, as they will owe no taxes when they receive the bequeathed assets. They also receive a “stepped-up cost basis” when you leave them property that has appreciated in value.  (Example: If you own stock that you purchased for $10,000, it is now worth $100,000, and you leave it to your son, your son will receive $100,000 worth of stock, tax-free, and his cost basis in the stock will be the fair market value of the stock at the date of your death — $100,000, rather than your original cost basis of $10,000.) 


It makes more sense than ever to use your IRAs and other retirement funds for end-of-life charitable gifts. Any funds from these qualified retirement plans that you leave to SPU are exempt from both income and estate taxes. The assets are removed from your taxable estate for estate tax purposes and no income tax is owed when a charity receives retirement plan assets as a gift. Thus, although up to 70 percent of retirement plan assets could be taxed if you left them to heirs, 100 percent of these assets pass tax-free to a charity such as SPU. So gifting these assets allows you to make a very significant gift to charity at relatively little cost to your heirs. 


In addition, the process of making the gift to charity is extremely simple and cost-free. No new will or codicil need be made. All you have to do is to request a “beneficiary designation form” from your retirement plan administrator and simply list SPU and/or other charities to receive all or a percentage of the retirement plan assets at the end of your life. The beneficiary designation form may be changed at any time should family circumstances change.   


General Rule Reminder: Upon death, it is better to make charitable gifts with IRAs and qualified retirement funds and give cash, securities and real estate to heirs. 


For more information on gifts of retirement plan assets, call 206-281-2702 or email us today.

Your gift will have an immediate and positive impact on the people and programs at SPU and it may be used
as a deduction on your income taxes.

Explore All the Giving Options
Stocks and Bonds
Real Estate and Other Personal Property
Life Insurance
Giving Cash
Recognition and Honors
Donor Advised Funds
Trust or Annuities

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