Thinking about making a planned gift to your favorite nonprofit? You might want to consider making a gift from your retirement plan, such as an IRA. There are a number of benefits to donating retirement assets to a registered charity. You can easily make this gift through your will:
You Can Avoid Double Taxation for Your Heirs.
Did you know your retirement plan is potentially subject to double taxation if passed on to your heirs? This could cost them 50% or more in taxes! Instead of naming your heirs as beneficiaries of your retirement plan, name your favorite charity.
Because it’s a qualified 501(c)(3) nonprofit, there’s no income or estate or inheritance tax due on your retirement plan assets passing to them. Then pass other assets that are not as highly taxed — things like stocks, bonds, and real estate — to your heirs.
You Can Offset Estate Taxes.
As long as the value of the donated assets is included in your gross estate, you are entitled to a charitable tax deduction when you donate your IRA.
You Can Take Advantage of the IRA Charitable Rollover.
If you’re 70½ or older, you can make current gifts totaling up to $105,000 per year from your IRA to a nonprofit using the IRA Charitable Rollover provision and not pay income tax on those withdrawals. This is also known as a Qualified Charitable Deduction (QCD).
You Can Make Gifts That Count As Your RMD.
If you’re 73 or older, you must take a required minimum distribution (RMD) from your retirement plan each year. By donating these (up to $105,000 a year), your RMD counts as a qualified charitable distribution (QCD), eliminating income taxes on the distribution.
It’s As Simple as Signing a Form.
When you’re ready to donate retirement assets, you typically need to fill out a designated beneficiary form and make a charity the beneficiary. Your employer or retirement plan administrator will supply this form.
It’s a Flexible Giving Option.
You don’t have to give all of your retirement account to charity, or even to a single charity — you can divide assets between charities or, if you choose, other heirs (see Point # 1, above, first). Your assets can be distributed according to any percentages you want.
You Can Make a Big Difference with No Impact on Your Daily Cash Flow.
By donating unneeded retirement assets, you can make a larger gift than you may have thought possible.
You’ll Invest in Your Legacy.
Giving to your favorite charity is a way to create and sustain your own legacy by making a difference far into the future and helping generations to come.
You’ll Feel Happier.
Numerous studies have shown charitable contributions create a positive, “feel good” response in the brain. Couple that with the tax savings you’ll realize, and you’ll find a gift from your retirement plan will contribute to your own long-term happiness.
You’ll Help to Advance a Cause You Care About.
By making a gift from your retirement plan, you’ll help the causes far into the future.
When you make such a gift, it is important to inform the nonprofit about your intended gift.
