Shortcuts
Retirement Assets
This gift is for you if...
- You hold a 401(k), IRA, or other retirement plan.
- You prefer to make a gift to us through your estate plan.
- You want to balance your giving between providing for your family and for us.
- You want to ensure the most efficient distribution of the assets in your estate.
Your largest asset may be your retirement plan: your 401(k), 403(b), IRA, Keough, or other such accounts.
When you plan your estate, it may seem natural to automatically designate a child or other relative as the successor beneficiary of the account after your death, then use other assets to make a charitable gift to Children's.
The Tax Trap
The IRS considers the balance left in your retirement account to be untaxed income. The income tax is in addition to estate tax on the retirement account balance.
The result of this double taxation? For estates fully subject to the estate tax, up to 70 percent of the value of the retirement plan can be consumed in taxes before your child, relative or friend receives it.
Example
Here's how it could work. Suppose the balance remaining in your IRA at your death is $500,000, that your estate is subject to 49% federal estate tax, and that your heir is in the 35% income tax bracket:
| IRA | $500,000 |
| Less 49% estate tax | ($245,000) |
| Transfer to heir | $255,000 |
| Less 35% income tax | ($89,250) |
| Net to heir | $165,750 |
| Total tax % | 67% |
For More Information
Complete the personal illustration form or contact us so that we can assist you through every step of the process.
This is not professional tax or legal advice. Donors must consult their tax and legal advisors regarding their specific situation.