Without proper planning, you may be surprised to find that the taxes applied to your retirement plan assets are different than you imagined. For instance, when you plan your estate, it may seem natural to designate a family member as the successor beneficiary of your retirement plan, and use other assets to make a charitable gift. But using retirement assets to make your donation and leaving other assets to your heirs often enables you to give more to your heirs.
Since we are a non-profit organization, we won't pay income tax on the distribution (nor will the gift be subject to estate tax). The entire amount comes to us, and your heirs will benefit from a reduced estate tax burden.
- You may make The Nature Conservancy a partial beneficiary of your plan and direct the balance to your heirs. At your death, the plan administrator will withdraw our share, providing an immediate gift to The Nature Conservancy and leaving the balance to benefit your family.
- Be sure to direct the gift to The Nature Conservancy through your plan's beneficiary designation form — rather than through your will. If you fail to do so, the assets will be included in your taxable estate.
- Don't use the balance in your retirement account to satisfy a specific dollar-amount bequest already in your will. Your estate will be treated as having received taxable income in the amount of the bequest paid by the retirement plan assets.
Can I use retirement assets to fund a charitable life income arrangement?
Yes, you can. Talk to your financial advisors and us first to project whether your heirs would benefit more from income from a gift plan or withdrawals from your retirement account. A lifetime withdrawal from your plan raises additional tax considerations.
How do I make a gift of my retirement account assets?
Notify your plan administrator of your wish to change the beneficiary. First, get the advice of your plan administrator and an attorney. Call us to ensure that your plans are fulfilled.
How can you give more to your heirs with less? For the sake of simplicity, let's assume you have $300,000 in an IRA and appreciated stock worth $250,000. You can see from this chart that your heirs actually benefit more from the lower valued gift of stock.
|IRA to Charity||Stock to Heirs||IRA to Heirs|
|Value of IRA||$300,000||$250,000||$300,000|
|Less income tax (33%)||$0||$99,000|
|Remainder to charity/heirs||$300,000||$250,000||$201,000|
What if I'm not affected by the estate tax?
The income your heirs receive from your IRA is called “Income in Respect of Decedent“ (IRD). IRD is taxable upon transfer and at the donor's highest tax rate. However, the gift of stock is taxable when the heirs sell the shares; and then in only the gain that has occurred from the date of transfer is taxable — typically at the 15% tax rate.
Information That May Interest You ...
Learn how a gift of assets can benefit you and nature.
You can leave a legacy for nature. Learn about our Legacy Club.
Discover other types of gift options with the Conservancy.
You can protect rivers and lakes and other natural places by making a planned gift with The Nature Conservancy. Contact us today.