Retirement Assets
One of the simplest and most "tax wise" ways to make a gift to Stephens College is through your IRA, 401(k), 401(b) or other qualified retirement plan. You can name Stephens as the direct or contingent beneficiary of all or a percentage of your plan. A simple fund agreement between you and the College will ensure that Stephens uses the money according to your wishes.
There are two major benefits to using retirement assets to fund a charitable gift. First, you will avoid federal estate taxes on the value of the assets that pass to Stephens. In addition, heirs are subject to income taxes when they receive distributions from retirement plans. Designating Stephens as beneficiary bypasses these taxes.
Example:
Marie has an 401(k). She does not want to leave the funds to her family members because she knows they will have to pay income tax on any distributions from the 401(k). Marie decides to name Stephens as the beneficiary of her 401(k). Upon her death, the funds in the account will transfer to Stephens. She will avoid paying estate taxes on the value of the account and make a generous gift to Stephens in the process.
Update: IRA Charitable Rollover Provision Extended
The IRA Charitable Rollover provision has been extended until December 31, 2009. To qualify for this unique opportunity, a person must be at least age 70 ½ on the date of the contribution. The contribution must come from an IRA – 401(k)s and other retirement plans are not eligible – and must have been taxable if paid directly to the individual. Donations can be made to public charities, but not donor advised funds or private foundations. This law is only in effect for 2008 and 2009, so you must act now to take advantage.
Benefits of the new provision include:
- Contributions to charity qualify as minimum required distribution from IRA plan without having to include the amount in income.
- Contributions do not count as part of charitable deduction when itemizing becasue amount is not included in income, so possible to give more than 50% of AGI.
- Money is permanently removed from estate, thus possibly lowering estate taxes.
- If you do not itemize, allows you to make a charitable gift without having to pay income tax on the withdrawn amount.
