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 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 custodian's website that permitted us to allocate percentage shares to charitable causes.
Kelly: This plan met all of 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 is probably among your most valuable assets. While the retirement asset is a great asset for you, it may not be the best asset to leave to children. If you have a taxable estate, your IRA or 401(k) plan will be subject to the estate tax, and any distributions to children will also be subject to income tax. That is why many tax planners suggest leaving retirement plans to charity. This gift will produce an estate tax deduction and the charity will not have to pay the income tax on 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 give us a call. 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 names and image above are representative of a typical donor and may or may not be an actual donor to our organization.
More Donor Stories