Everyone Wins With a Gifted Retirement Fund

It's almost always better for a donor to make a testamentary gift of a retirement fund as opposed to a simple bequest to your organization — look at the table below to see the advantages. 

The numbers come from Jerry, who, at the time of his death, has the majority of his assets in an IRA and a bank CD. Jerry’s IRA has a value of $200,000 and the CD a value of $100,000. Jerry’s will states his desire to gift $200,000 to his favorite charitable organization, with the remainder of the $300,000 going to his heirs. 

The table outlines the effects of Jerry gifting his IRA to that charity versus making a gift of the same amount via a simple bequest provision in his will:   

	Charitable Bequest	IRA to Charity
Testamentary Gift	$200,000	$200,000
IRA Transfer to your Org	- 0 -	$200,000
Income Tax on IRA (35%)	$70,000	- 0 -
Charitable Bequest	$200,000	- 0 -
Remainder to Heirs	$30,000	$100,000

Takeaways: 

1. By naming the charity as the beneficiary of his IRA, Jerry saved his heirs $70,000 in tax.
2. Jerry must rely on his advisors to accomplish his objectives as the rules regarding IRA’s are complex.
3. This example shows income tax savings only. For larger estates, there very well may be estate tax savings, too.