Talking Point: Donating your IRA or other Qualified Plan to Charity Upon Death

If I am already wanting to make a charitable gift, does it make sense to donate a percentage of my IRA or other Qualified Plan to charity upon death?

Yes. In many cases it can makes sense to do this.

Why? …

When you designate a charity as a beneficiary to receive your IRA or other retirement assets upon your death, rather than donating retirement assets during your lifetime, the benefits seem to multiply.

Things to consider:

• Neither you, your heirs, nor your estate will pay income taxes on the distribution of the assets.
• As is true for all of your assets owned at death, your estate will need to include the value of the assets as part of the gross estate for estate tax purposes, but it will receive a tax deduction for the charitable contribution, which can be used to offset any estate taxes.
• Because charities do not pay income tax, the full amount of your retirement account will directly benefit the charity of your choice.
• It’s possible to divide your retirement assets between charities and heirs according to any percentages you choose.
• You will have the opportunity to support a cause you care about as part of your legacy.

Process for making the designation is not too bad …

Making a charity the beneficiary of your IRA or other retirement assets is usually a straightforward process. You ask for a beneficiary form from your employer or your plan administrator. Most banks and financial services firms also have beneficiary forms. You fill them out and place a percentage going to a charity of your choice. The administrator can normally provide you with suggested language for naming beneficiaries to these accounts. Once the designated beneficiary forms are in place, the retirement assets will generally pass directly to your beneficiaries (including charities) without going through probate.

Some warnings …

If you are married, ask the plan administrator whether your spouse is required to consent. If required but not done, this could result in a disqualification of the charity as your beneficiary.

Always seek advice from a qualified expert that knows all of your facts. Make sure this concept fits into your global estate plan. Be clear about your wishes. Communicate with your spouse, lawyer and any financial advisers. Do not hesitate to give them a copy of the completed beneficiary forms for their information and input.

Naming a charity as a beneficiary of your IRA or other qualified plan is a good thing to consider if you have been thinking about gifting to a charity.