Retirement Plan Assets

Money in qualified tax-deferred retirement plans is not subject to income tax when invested, so the income tax generally is due when the money is withdrawn, even when distributed to other individuals after the death of the plan's owner. Depending on the size of the estate, these assets might also be subject to estate taxes, inheritance taxes and generation-skipping transfer taxes. However, qualified retirement plan assets given to charity at death can bypass all these taxes.

You can best make outright gifts at death through naming FaithTrust Institute on the plan's beneficiary form, available from the custodian of the IRA, 401(k) or other type of retirement account. You can name FaithTrust Institute for a percentage or the entire plan, or name your spouse or other person as primary and FaithTrust Institute as secondary beneficiary. Or you can even use the plan to set up a trust at death that will pay to someone else for life or a period of years, then pass the principal to FaithTrust Institute, thus optimizing benefits for everyone. Use the beneficiary designation document, because retirement plan assets left to a charity through a will or living trust may be taxed.

Advantages

• You can make a sizable charitable contribution of assets that would otherwise be heavily taxed, once you no longer need them.
• You can then direct less-taxed assets to family and heirs. This delivers more from the estate to both family and FaithTrust Institute.

For more information, contact Jane Fredricksen, Executive Director, at 206-634-1903 ext. 25 or jfredricksen@faithtrustinstitute.org.