Lit and Mary

Lit and Mary are retired from long careers in higher education (more than 80 total years), where retirement and pension plans included pre-tax contributions to 403-B accounts. After retirement, the equities portion of the 403-B accounts were distributed directly to IRAs. They also own their home, stocks, and the remaining pension plan through their institution.

They have a grown daughter and grandchildren, and their wealth advisor keeps them apprised of the legal changes that affected the inheritance of IRAs and other pre-tax pension funds. The inheritance would result in tax liability with limited time for heirs to withdraw the assets and pay the taxes.

Lit and Mary saw the opportunity to participate in the IRS's Qualified Charitable Distribution from an IRA, which can be up to $100,000 in tax-free charitable distributions annually. Their IRA gift is a direct transfer to the Omicron Delta Kappa Society and Educational Foundation, Inc. to avoid the tax liability. By making the gift now to establish an endowed scholarship at OΔK, they can see the results of their gift during their lifetime while lowering their taxable income down the road. They have expressed that they are happy to use some of their IRA to benefit students from the University of Richmond in perpetuity.

Is a charitable bequest 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 type of gift will produce an estate tax deduction, and the charity does not have to pay a 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.