Charitable Gifts from Traditional Retirement Plans
Millions of dollars are transferred into IRAs, 401(k)s and other traditional qualified retirement plans every year by the American public. The funds in these plans have tax deferral for both contributions and earnings during the participant's lifetime. These funds are able to grow much more rapidly than savings or investments that are taxed currently.
Unfortunately, by naming someone other than your legal spouse as beneficiary of those assets, he/she may receive as little as 25 cents on the dollar after income and estate taxes are paid. That is because IRD (income in respect to a decedent) assets are subject to both income and estate tax.
You can avoid the estate tax and a spouse may rollover the funds tax-free to his or her own IRA if you name your spouse as your designated beneficiary, thereby avoiding income tax. However, the assets may then be taxed in the surviving spouse's estate. Then the withdrawals by the spouse are taxed as received.
Designation of Charitible Beneficiary
Traditional retirement plans are one of the best assets to leave to charities, if you wish to avoid income and estate tax. If possible, leave other assets to family or loved ones.
You can designate Southwest Reservation Aid as a beneficiary to receive all or a portion of your retirement account upon your death. Your estate will receive a charitable deduction for the value of the assets distributed to Southwest Reservation Aid. Since swra is a tax-exempt charity, it will pay no income tax on the distribution.
Charitable Gift During Life
It is possible to use funds from an IRA or traditional retirement account to make charitable gifts during your lifetime.
If you make a gift to Southwest Reservation Aid using retirement account assets during your lifetime, the transfer is treated as a withdrawal, which subjects it to income tax. However, itemizing your deductions makes you eligible for an income tax charitable deduction, lessening the tax burden.
Whatever you decide, please know how appreciated your support is by Southwest Reservation Aid and the Native Americans we serve.
If you have any questions regarding planned giving, please contact Suzi Smith in our Planned Giving Department at (877) 853-6474. You are also encouraged to consult with your legal and financial advisors when considering a planned gift.