One of the easiest and most powerful ways to make gifts to your favorite charities is to name them as beneficiaries of your IRA, 401(k), 403(b), or other qualified plans. Retirement savings often represent our greatest financial assets, and gifts from them at our deaths may have significantly greater impact than those we can afford to make during life. Typically it costs nothing and takes but a few moments to name Allegheny College and/or other organizations as beneficiaries.
The first step is to submit a beneficiary designation form to your plan administrator. Most forms are available at fund websites. You will be able to name one or more beneficiaries, both human and organization. Donors typically assign percentage values for their beneficiaries rather than specific dollar amounts as final fund values cannot be known in advance. You will need the full legal name, address, and federal tax ID of the charity/ies that you wish to support.
(Allegheny College, 520 N. Main Street,
Meadville, PA 16335, 25-0965212)
Beneficiary designations supercede wills, so to ensure that the people and organizations you wish benefit from your hard work, be sure to review them periodically.
It’s important to note that there are spousal protections related to some retirement accounts and they vary by type and state. No federal rules govern IRA beneficiary designations, but in marital property states, spousal consent is generally required to include entities other than a spouse.
Workplace retirement accounts such as 401(k)s and 403(b)s are governed by federal law mandating that spouses are automatically entitled to receive 50% of fund owners’ accounts, regardless of what their beneficiary forms indicate. A properly executed spousal waiver will, however, allow a plan owner to designate more than 50% of her account for charity or other beneficiaries.
It is absolutely essential that you inform your executor/trusted persons and the charitable organizations that you are supporting about your plans because IRA fund administrators have no obligation to inform charities of their beneficiary status before or after your death.
Part of the fun in making a gift like this is determining what you want to accomplish with it. Representatives at Allegheny and other nonprofits will be delighted to speak with you about your goals to ensure that your wishes are carried out.
At Allegheny, you will become a member of the William Bentley Legacy Society. Members are recognized in the College’s annual Report of Gifts and other publications (unless anonymity is preferred) and are invited to participate in special events. If you are celebrating a class reunion, your beneficiary designation will be included in your class reunion gift; if you are 62 or older, your gift will count toward major fundraising campaigns.
A warm heart is not the only benefit of charitable gifts of retirement assets. There are also practical reasons to give. Most IRAs (Roths excluded) and workplace retirement accounts are subject to both federal income taxes and estate taxes. Children and other non-spousal heirs pay income tax on their distributions, so you may wish to give them other assets through your will that will not be taxed, leaving retirement assets to charity. These gifts are also subtracted from donors’ estates, thus reducing the amount owed. Estate taxes currently affect only those whose assets are greater than $11.4 million (or $22.8 million for married couples), due to exclusions, but exclusions and rates change frequently. It’s impossible to predict what the situation will be at our deaths. Advance planning is a good idea and beneficiary designations do not require the use of an attorney.
We have a variety of educational resources to help with making gifts from retirement assets. Visit allegheny.giftplans.org for more information, including free e-brochures, or call us at (814) 332-6519 or toll-free at (866) 332-3853. We also may be reached at giftplan@allegheny.edu. Prospective donors are urged to consult their personal tax and financial advisors concerning the specific consequences of making gifts to Allegheny.
Name a charitable remainder trust as a beneficiary of your retirement fund at your death to support a favored charity’s mission and reduce the income tax burden on your heirs. No income tax is due on retirement plan assets transferred to a charitable trust. In exchange for your gift, your spouse/partner, children, or other heirs will receive income for life or a specific period not to exceed 20 years. The principal will be put to charitable use in the manner that you designate at the end of the trust term. Visit allegheny.giftplans.org to request our free e-brochure, “Charitable Remainder Trusts.”