Your retirement plan is designed to benefit you during your retirement. However, you may name beneficiaries for your plan in case you pass away with funds still in your account. Along with family, relatives and friends, a charity may also be named as the beneficiary. This is among the easiest and most tax-wise ways to give.
Most retirement plans are income tax-deferred, which means that you are required to pay income tax when the funds are distributed. This means that every dollar your heirs receive from retirement accounts would be subject to income tax (unless they are your spouse or the distribution derives from a Roth IRA). Depending on the size of the estate, retirement funds, like other estate assets, may be subject to estate tax as well. However, distributions from retirement accounts to a charity such as the American Floral Endowment would be subject neither to income nor estate tax.
Besides tax savings, a gift of retirement assets has other advantages:
- It is easy to arrange. You merely request a Beneficiary Designation Form from your plan administrator.
- You can designate AFE as beneficiary of whatever portion you choose. For example, it might be 10 percent or 25 percent of the account. If you have otherwise provided for heirs, you could leave the entire balance to AFE.
- The gift is revocable. You retain full control of your retirement funds should you need them, and you can change beneficiaries at any time.
If you have a retirement account, and you would like to leave a legacy to AFE to secure its future, the most tax-efficient gift you can make may be with some left-over funds in that account.
Gifts of retirement assets during your lifetime
If you are over 59 ½ years of age, you might also consider an outright gift from your IRA or 401(k) or 403(b) plan. While the withdrawal would be a taxable event, your charitable deduction would most likely offset the taxable income.
To find out more about naming the American Floral Endowment as a beneficiary of your IRA or retirement plan, or to make an outright gift from retirement assets, please contact AFE at (703) 838-5211.