Major and Planned Giving
Gifts of Retirement Assets
Tax-deferred retirement-plan benefits are great sources
of retirement income, but not always a good choice for making gifts to
children and grandchildren. You may consider using retirement-plan
benefits to make a significant gift that will support Denison. And
because of the estate and income tax treatment of retirement plan
benefits, the cost of your gift to your estate and heirs is often
relatively small.
Retirement-plan benefits include assets held in
Individual Retirement Accounts (IRAs) and assets held in accounts under
401(k) plans, profit-sharing plans, Keogh plans, and 403(b) plans.Income taxes on retirement-plan benefits are deferred
but not avoided. That means as these assets are withdrawn during
retirement by the account owner or the account owner's spouse, they are
subject to income tax.
In addition, retirement-plan benefits left to children,
grandchildren, and other beneficiaries at the death of the account
owner are subject to both income tax and estate tax. This combination
of income taxes and estate taxes can result in a tax hit equal to 75
percent or more of the retirement-plan benefits.
Example: Bill Woods accumulates $1 million in
retirement-plan assets. Upon his death at age 73, he leaves them to his
two children. Because of the tax bite, however, the amount Bill's
children receive, after taxes, could be less than $250,000.
By contrast, Bill could have left the $1 million to
Denison, and the entire amount would have been available to create a
scholarship or fund another of his favorite programs.
- Planning pointer: Retirement-plan benefits can also be used to fund a qualified charitable remainder trust for the benefit of a spouse. If the surviving spouse is designated beneficiary of the trust payments for his or her life, then the entire value of the trust, regardless of its size, will be deductible for estate-tax purposes.
- Please see our Special IRA Giving Opportunity page for more information about gifting IRA assets.