Retirement Funds: Leaving Your Legacy to Charity

You never know what will happen in life. This notion rings especially true in this unprecedented time of instability and insecurity. Thus, it is crucial to prepare several plans to bequest one’s retirement fund if an unforeseen event were to happen. Almost everyone has a 401K, IRA, or another retirement plan. These funds can be among the most significantly produced reserves in your lifetime. If you haven’t given any thought to what you want to do with the retirement fund you’ve accumulated if you unexpectedly pass, it is helpful to know that you can donate all or some of these retirement funds to charity if you so choose. 

Important Tax Advantages When You Gift Your Retirement Funds

Posthumous giving is a simple and a highly beneficial option for a variety of reasons. First, distributions from IRAs upon death avoid income and estate tax. You, your heirs, and your estate will not be required to pay income taxes on the distribution of the retirement fund. The tax deduction you will receive for the charitable contribution can be used to offset estate taxes. Likewise, charities do not pay income tax, so the full amount you give will benefit the organization you choose directly. 

A charity can be named the beneficiary of your IRA no matter the size of your account, and this can easily be changed without the help of an attorney. This option is more straightforward than having to revise a trust or will, which requires legal assistance. You can also choose to divide your retirement funds between select charities and heirs according to any percentages you desire. This entire process allows charitable gifts from your account at death to avoid probate. These insights should apply to other types of retirement accounts too. Still, you should check with your plan administrator for any changes in the plan’s beneficiary rules. Therefore, posthumous giving to charity poses a uniquely advantageous option that is easy on both you and your heirs. Furthermore, it is immensely beneficial to the charity you deeply care about.

Gifting Your Retirement Funds Is Super Simple and Easy

Donating your retirement fund to charity is surprisingly simple. All you have to do is fill out a designated beneficiary form through your employer, plan administrator, or almost any bank or financial services firm. To make the processes even easier, have the tax ID number of the charity you plan on donating to on hand. If you’re interested in donating some or all of your retirement fund to a charity, don’t forget Believe In Me: foundation for kids. Our tax ID is 20-4830357. 

Remember that you can divide your retirement fund between charities and heirs however you wish. You may have to obtain your spouse’s consent if you are married. Failure to do so can disqualify the charity as your beneficiary. To avoid this, be transparent with your spouse, lawyer, and financial advisors and provide them with copies of your beneficiary forms.

You Can Restrict How Your Retirement Fund is Used

You may be thinking this process sounds a little too easy. Indeed, there are a few caveats to donating your retirement funds, but they are easily overcome with simple solutions. If you are worried that the charity will not use your gift in the way you would like, many charities allow the beneficiary to provide a written note describing how the funds should be used, eliminating any anxiety around the distributions of funds to programs it was not initially intended for. Another helpful tip to remember while planning your estate is to refrain from accidentally duplicating gifts by naming the same charity on your trust or will as the beneficiary of your retirement account. 

You Can Leave a Legacy with Your Retirement Funds

Additionally, incorporating charitable giving into your estate plan can help ease any anxieties or doubts you may have surrounding your heirs’ ability to steward your estate responsibly after your death. Lastly, gifting retirement funds may allow you to obtain naming rights for a large gift, thus allowing your legacy to live on after your passing. Ultimately, making a posthumous charitable contribution from your retirement account allows you to be proactive with your retirement fund while benefiting yourself, your heirs, and a cause you care about.

Donating Retirement Funds is One of the Best Ways to Help Disadvantaged Kids

Without charitable gifts in all shapes and sizes, Believe In Me would not be able to continue to fund the vital work our beneficiaries are doing to help kids experiencing disparities in our community. If you have any questions regarding the donation of your retirement accounts, please contact us and talk to your financial advisor today. And as always, we sincerely appreciate any contribution you can give as you decide if donating your retirement funds is a feasible option for you. If you’re interested in naming Believe In Me as a beneficiary for your retirement fund, please call (509) 448-1412 to schedule time to talk with our CEO.

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