Accounts at your bank or credit union can be the source of gifts through a payable on death (POD) designation. By completing a simple form provided by your bank, you can designate that Indiana University will receive the funds in the account at your death. The university will have no access or right to the funds during your lifetime, and you can change the designation at any time.
A gift through a POD designation is an effortless fit for most estate plans. Often, bank accounts are not the primary source of funding for reaching important goals. Consequently, this can be a simple way to make a gift that does not interfere with other estate distribution arrangements or needs.
Can you plan a gift of securities and keep lifetime control of the gift? Yes! You can give stock and mutual funds through transfer on death (TOD) designations similar to the POD designations on bank accounts. This means that you can make a gift of stock (or other securities) by completing a simple TOD registration with your broker or the company issuing the stock. At the time of your passing, Indiana University receives the stock. During your lifetime, however, IU has no access, and you are free to change the designation.
Leaving appreciated stock to heirs can have important tax benefits that you should consider in your estate planning. Nonetheless, a TOD designation for a particular stock—or perhaps a portion of your stock holdings—can be a satisfying way to make a substantial gift while you retain lifetime control of your portfolio.
A portion of your personal wealth—perhaps a significant portion—is likely held in some form of tax-deferred retirement account. Because contributions and earnings are not taxed, the IRS fully taxes distributions, whether to you or your heirs.
When heirs receive a distribution from your tax-deferred retirement account, it is subject to income tax that reduces the amount they actually keep—an unpleasant “tax surprise” that significantly dilutes the inheritance you intended to leave. Consequently, if you want to make a gift and provide for loved ones through your estate plan, it makes sense to leave retirement assets to a nonprofit like Indiana University (since distributions are never reduced by taxes when a charitable organization receives them) and designate assets that are subject to favorable tax treatment (such as appreciated stock or life insurance policy proceeds).
If you name Indiana University the primary beneficiary of the retirement account, the university is the first in line to receive the funds. You can also name IU the contingent beneficiary, which means IU receives the funds only if the primary beneficiary does not. Of course, you can always change your beneficiary designations if your needs or goals change. Contact us to learn more about why retirement account assets can be a tax-wise gift option as part of your overall estate plan.
