Michael and Kelly were retired engineers with two adult children. They owned a home, some stocks, and IRAs. They met with their financial advisor to discuss a plan to provide for their family and for some of their favorite charities.
Kelly: We both had a lot of money in our IRAs?more than we could ever use. We wondered if we could pass this on to our children.
Michael: Our advisor explained the problem with giving our retirement savings to our family. He said a majority of the gift would be taxed. We didn't want our children paying any more in taxes than they already pay.
To alleviate their concerns, Michael and Kelly's advisor created a plan that stipulated their stocks and home would go to the children. He then recommended a bequest of the retirement assets be left to their favorite charities. These charitable organizations could then receive all the assets from Michael and Kelly's IRAs tax-free, allowing them to use all the funds to further their missions.
Michael: It was easy to make bequests from our IRAs to our favorite charities. We filled out the online forms on our IRA administrator's website that permitted us to allocate percentage shares to charitable causes.
Kelly: This plan met all our goals. We liked the fact that our children could immediately sell the house and stocks with little or no tax due. We were also happy to help some worthy organizations continue their good work.
Is a gift of an IRA to charity right for you?
Your retirement plan could be among your most valuable assets. While it is
a great asset for you during your lifetime, it may not be the best asset to
leave to children. If you have a taxable estate, your IRA or 401(k) plans
will be subject to the estate tax, and any distributions to children will
also be subject to income tax and Income in Respect to a Decedent (IRD)
tax, leaving only a portion of the remaining funds available for your
children to use. That is why many tax planners suggest leaving retirement
plans to charity. This gift will produce an estate tax deduction and the
tax-exempt charity will be able to use the full value of the gift.
If you are in the process of determining which assets are "good" assets to leave to charity and which assets might be "good" to leave to family, please
contact us. We can help you with estate planning strategies that will reduce your taxes and allow you to maximize the gifts you leave to family and charity.
*Please note: The story, names and image above represent an example of the benefits of this type of estate-planning tool. They do not represent actual donors to GFA.
