Giving Retirement Plans

Vice President Foundation Bradley BurckFor some people, donating the proceeds of their retirement plan represents a viable plan for leaving a legacy. The reason: if the owner of a retirement plan passes away while it is part of their estate, their heirs can be subject to income taxes and possibly estate taxes. We can help you control the distribution of retirement plan assets to your family, and put your charitable interests ahead of taxation.

Congress has amended the rules on retirement plans. As a result, when the account holder reaches age 70½ the minimum payout requirement is lower than in the past. This means those in their 80s and 90s are more likely to retain larger balances in their IRAs, KEOGHs, or 401(k) accounts. This is good news for older Americans living on a fixed income. However, as they do their estate planning, many overlook the looming tax liabilities that accompany such a scenario.

As many of you who have established a retirement account know, Congress allows taxpayers to place money into such accounts tax-free during our working years, meaning we don’t have to pay income taxes on those funds. In addition, these accounts grow tax-free, with the compounding and investment growth helping this fund to increase as rapidly as possible to help support us during retirement.

The bad news: if you pass away while holding a retirement plan in your estate, this can mean your heirs will owe income taxes on the proceeds, and possibly estate taxes. In a worst-case scenario, the bill can reach 60 percent! To avoid this, you can name the Cabell Huntington Hospital Foundation as your retirement plan’s remainder beneficiary. This can be easily done by calling your plan’s administrator and completing a new beneficiary designation form. Since charitable organizations do not pay estate or income taxes, this means the plan’s full value will become a gift.

To find out more about giving retirement plans to a local nonprofits, please contact Bradley Burck at 304.526.2658.

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