We are encouraged to save for retirement from an early age, and tax-favored retirement plans have an important place in accumulating and growing these assets.
But many people don’t know that there are ways to use your retirement plan assets to maximize what you leave to the people and organizations you love and support.
Some reasons to consider donating these funds:
- You have other retirement resources: Many people have accumulated sufficient resources outside of their plans—enough that they no longer need the dedicated retirement plan funds for support during retirement.
- You have assets to leave heirs tax-free: Retirement plan assets are highly taxed and cannot be distributed or transferred to heirs on a tax-free basis. Other savings and investments that have already been taxed can be transferred to heirs with no additional tax—some (appreciated stock or real estate, for example) with the bonus of a step-up in basis. Income taxes on retirement plan assets have accumulated on a tax-deferred basis.
- You wish to maximize your gift and avoid taxes: A planned gift of retirement assets to a qualified charitable organization can reduce or eliminate these taxes, while providing more for family members by allowing other assets to transfer free of tax.