When you name 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 multiply:
When done properly, charitable donations of retirement assets can minimize the amount of income taxes imposed on both your individual heirs and your estate. It is limited to IRAs, and there are other exclusions and considerations as well.Īs part of an estate plan: By contrast, there can be significant tax advantages to donating retirement assets to charity as part of an estate plan.
This is known as a qualified charitable distribution. People who are age 70 ½ or older can contribute up to $100,000 from their IRA directly to a charity and avoid paying income taxes on the distribution. Options for donating retirement assetsĭonating during your lifetime: In order to donate retirement plan assets during your lifetime you would need to take a distribution from the retirement account, include the distribution in your income for that year, account for any taxes associated with the distribution, and then contribute cash to the charity-with one exception. For those who wish to give to charity, a natural question is whether they can donate retirement assets-and if there are any tax advantages for doing so. Others may find that, due to their other resources and investments, they are not in need of all the funds accumulated in their retirement accounts. In some situations, it can mean more funds for charities and heirs alike.įor many people, a retirement account like an IRA or 401(k) may be the most significant source of assets accumulated in their lifetime. However, a direct contribution of retirement assets to charity as part of an estate planning strategy can be very tax efficient. In many cases, though, there is little to no tax benefit associated with this type of donation. It is always possible to donate retirement assets, including IRAs, 401(k)s and 403(b)s, 1 by cashing them out, paying the income tax attributable to the distribution and then contributing the proceeds to charity.
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