Designate Summit as a Beneficiary of Your IRA or Retirement Plan

The following are a few ideas regarding philanthropic planning with retirement funds:

Beneficiary designation. Name a charitable institution such as The Summit Country Day School as a beneficiary of unused retirement assets after your lifetime. Charitable organizations are generally exempt from income tax – therefore a charity receiving qualified retirement funds will receive the funds free of income and estate tax. Consider leaving heirs less heavily taxed assets rather than traditional retirement funds.

Life income gifts for your heirs. You may direct part or all of your retirement assets be used to establish a life income gift vehicle for individual heirs. This could involve the creation of a charitable remainder trust to be established upon your passing which will pay income to one or more of your heirs for a term of years or for their lives. The ultimate remainder in the trust will go to the charity of your choice. Such a designation will avoid any income taxes on the retirement assets but may involve estate taxes. Consult with an estate planning attorney to further investigate this option.

Outright gift. Individuals may also consider outright gifts to charity with IRA or other retirement funds. This can be done by either of the two following methods:

IRA rollover gifts. For traditional IRA accounts, individuals age 70 ½ and older may direct funds from an IRA to a qualified charitable institution for up to $100,000, without any recognition of taxable income by the donor. The funds must be transferred directly from the IRA account to the charitable recipient, and there is no charitable deduction for this gift since the avoidance of taxable income is the equivalent of a full deduction. An added benefit of the IRA rollover option is that the funds directed to a charity may also discharge a donor of his or her IRA Required Minimum Distribution (RMD), which is an added tax savings if the donor does not wish to incur taxable income from his or her RMDs. Consult your IRA custodian for the required paperwork to make an IRA rollover gift to charity and information on RMDs.

Withdrawal and gift. For individuals age 59 ½ and older, it may also be possible to withdraw funds from a qualified retirement account and subsequently contribute those funds to a charitable institution without negative tax consequences. In many cases, the income tax on the funds withdrawn is offset by the charitable income tax deduction. Consult with your CPA or financial advisor to further investigate this option.

Many individuals may feel they can’t afford to be charitable during their lives. However, with the creative use of excess retirement assets, they are able provide for their heirs while making a philanthropic contribution. Additionally, with careful planning, such gifts may help preserve or perhaps even increase the amount of remaining assets available for heirs.

Please note: The Summit Country Day School is not in the business of offering legal or tax advice.
It is strongly recommended that you speak with your own financial/legal advisor prior to making a planned gift.