The Justice Love FoundationIncrease your gift to the Foundation—and your tax deduction—with a simple strategy. Contact our Team for additional assistance.
Donating Retirement Assets to The Justice Love Foundation
Donating an IRA or other retirement assets to charity can be a tax-smart estate planning strategy.
Retirement Asset Donations
It is always possible to donate retirement assets, including IRAs, 401(k)s and 403(b)s,by cashing them out, paying the income tax attributable to the distribution and then contributing the proceeds to the Foundation. In most cases there is little to no tax benefit associated with this type of donation. However, a direct contribution of retirement assets to the Foundation as part of an estate planning strategy can be very tax efficient. And, in some cases, it can mean more funds for the Foundation and heirs alike.
A retirement account like an IRA or 401(k) may be the most significant source of assets accumulated in one’s lifetime. But, you may find that, due to their other resources and investments, you may not in need of all the funds accumulated in these retirement accounts. For those who wish to give to the Foundation, a natural question is whether they can donate retirement assets—and if there are any tax advantages for doing so.
Your Options for Donating Retirement Assets
You can Donate 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 Foundation-with one exception. People who are age 70 ½ or older can contribute up to $100,000 from their IRA directly to a the Foundation and avoid paying income taxes on the distribution. This is known as a qualified charitable distribution. It is limited to IRAs, and there are other exclusions and considerations as well.
As 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. When done properly, charitable donations of retirement assets can minimize the amount of income taxes imposed on both your individual heirs and your estate.
Some Tax implications of Donating Retirement Assets During Life
Retirement plan benefits are only payable to the employee or account holder who earned them, with a few exceptions for spouses or survivors. With the exception of a qualified charitable distribution as described above, distributions from non-Roth retirement plans are taxable as ordinary income to the person or entity that receives them. This is true whether the recipient is the original account holder or a beneficiary of the account holder. Unlike other inheritances that can be passed to heirs free of income tax, distributions from inherited retirement plans are taxable as ordinary income to the person who receives them.
Donating an IRA to charity upon death
When you name the Foundation 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:
- Neither you and your heirs nor your estate will pay income taxes on the distribution of the assets.
- Your estate will need to include the value of the assets as part of the gross estate but will receive a tax deduction for the charitable contribution, which can be used to offset the estate taxes.
- Because charities do not pay income tax, the full amount of your retirement account will directly benefit the charity of your choice.
- It’s possible to divide your retirement assets between charities and heirs according to any percentages you choose.
- You have the opportunity to support a cause you care about as part of your legacy
Designate the Foundation as the beneficiary of an IRA or 401(k)
When you’re ready, making a charity the beneficiary of your IRA or other retirement assets is typically straightforward: Fill out a designated beneficiary form through your employer or your plan administrator. Most banks and financial services firms also have beneficiary forms, or they can provide you with suggested language for naming beneficiaries to these accounts. Once the designated beneficiary forms are in place, the retirement assets will generally pass directly to your beneficiaries (including charities) without going through probate. If you are married, ask the plan administrator whether your spouse is required to consent. If required but not done, this could result in a disqualification of the charity as your beneficiary.
Be clear about your wishes with your spouse, lawyer and any financial advisors, giving a copy of the completed beneficiary forms as necessary.
Advantages of making The Justice Love Foundation, a retirement account beneficiary
Although designating any qualified charity as a beneficiary usually allows an estate to claim a charitable contribution and deduction, naming the Foundation as beneficiary of a tax-deferred retirement account such as an IRA or 401(k) gives clients and heirs more flexibility. The Justice Love Foundation is a public charity and is a tax-advantaged charitable corporation and is used solely for supporting charitable causes.
- Upon death, your IRA assets can move directly to the Foundation. It can then be distributed to our causes immediately or over time through one of our endowments.
- Alternatively, you can use your assets to provide multiple heirs with a fund to support their individual charitable giving by specifying that the IRA be allocated across multiple Foundation endowments. In that case, each individual will have their own legacy of giving that can stretch far into the future.
Donating retirement assets to our Foundation: It’s an excellent choice
- Provide more money to charities
- Minimize capital gains tax exposure
- Take a tax deduction
Let Our Donations Team Assist with a Plan
Nearly half of high-net-worth donors do not take advantage of tax-saving methods that could help them save and give more. Let our Donations Team help you with the opportunity to position yourself by having a quick conversation on the best structure for charitable giving to the Foundation. Please take your time and submit your questions below, we will respond as quickly as possible.
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