Gift of Retirement Assets
Qualified retirement plan assets, including Individual Retirement Accounts and most 401(k)'s, are often particularly well-suited for planned giving. Employer sponsored retirement plans and private funds (such as an IRA) can be gifted easily by designating Fresno State as the final beneficiary or as beneficiary of a percentage of the account.
Such a gift can avoid significant estate and income taxes for the donor's heirs, who would otherwise have to pay the deferred taxes. In fact, at the time your assets pass to the next generation, proceeds of retirement plans can be among the most heavily taxed assets in your estate.
Because they can accumulate rapidly, retirement accounts are fast becoming a primary source of funding for charitable gifts to Fresno State. Taxes and complex rules that govern retirement accounts require particular attention to the opportunities for charitable giving from these assets.
Tax-qualiﬁed retirement plans, 401(k)'s, individual IRAs and the newer Roth IRAs all represent wonderful charitable opportunities. Roth IRAs are discussed separately below.
Why Are Tax-Qualiﬁed Retirement Plans Often Called "Tax Traps"?
Although tax-qualiﬁed retirement plans and IRAs are important and effective vehicles for accumulating retirement savings, that picture changes once you have retired. Distributions from the accounts are generally taxed as ordinary income. Required minimum distributions increase each year after age 70½, forcing you to shrink your tax-advantaged account and pay taxes – even if you don't need the income at that time.
The income taxes on distributions continue for a spouse or heirs who inherit your retirement accounts. Required distributions for your heirs may be forced during pre-retirement, potentially causing heirs to pay taxes on distributions during their peak wage-earning years. Because retirement assets are subject to estate and generation-skipping taxes for transfers to non-spousal heirs, the combination of these transfer taxes and the income taxes can exceed 80%!
Note: It is generally not recommended that you list "my estate" as the beneﬁciary of retirement plan assets, or that you use these assets to satisfy a speciﬁc monetary bequest in your will; this may have severe adverse tax and other cost implications. As always, consult your advisors to learn what will be best for your individual situation.
What Are the Financial Beneﬁts of Making an Estate Gift Through My Tax-Qualiﬁed Retirement Account or IRA?
Designating Fresno State as the beneﬁciary of a retirement account causes the charitable gift to be deductible for estate tax purposes. Also, heirs may prefer to receive assets that are less highly taxed, leaving the retirement assets instead to charity. A tax-exempt charity will not have to pay the income taxes otherwise due and will therefore enjoy the full value of the gift.
You may prefer to designate retirement assets to a charitable life income arrangement (such as a gift annuity or charitable remainder trust) that will pay income to your heirs and eventually beneﬁt Fresno State. Your arrangement can be customized to provide a guaranteed income for life, accumulate over time (both income and assets), or provide ﬂexibility in the timing and amount of distributions to the beneﬁciaries.
What Are the Financial Beneﬁts of Making a Lifetime Gift Through My Tax-Qualiﬁed Retirement Account or IRA?
Generally, an income tax charitable deduction is available for the charitable gift, offsetting the income taxes generated by the distribution. Sometimes the charitable tax beneﬁts may be less than the income taxes due, especially if the gift is made via a life income arrangement or other "split beneﬁt" form of contribution. Required distributions after age 70½ can create an unwanted tax burden. It can make sense to use these required distributions to fund charitable gifts and earn income tax deductions.
What Are the Financial Beneﬁts of Making a Lifetime or Estate Gift Through My Roth IRA?
Distributions from a Roth IRA are generally not taxed. You may fully beneﬁt from the available tax deductions for gifts from a Roth IRA. These assets are also a great source for funding a charitable gift annuity and securing an income that is guaranteed to last for your lifetime.
How Do I Make a Gift From a Retirement Plan or IRA?
Changing your plan's successor or contingent beneficiary designation is a simple process. For estate gifts, please remember that these assets are directed by a separate beneﬁciary designation form, not by your will. You will need to contact your plan administrator or IRA custodian to request the appropriate form for changing or adding a beneﬁciary. When you receive the form, you will need to indicate "California State University Fresno Foundation, IRS #94-6003272," as the beneﬁciary. For lifetime gifts, simply indicate the desired distribution amount on the form.
It is generally not recommended that you list the estate as the beneﬁciary of retirement plan assets, or that you use these assets to satisfy a speciﬁc monetary bequest in your will; this may have adverse tax and other cost implications.
Direct Your Gift for a Specific Purpose
You can further designate the gift to be used for a speciﬁc purpose within Fresno State through a letter of intent that you send to the Planned Giving office. It is also possible to establish an endowment by entering into a revocable agreement that becomes effective upon funding (usually after your death). Liz Garvin, Director of Planned Giving, can be reached at firstname.lastname@example.org or (559) 278-4038. He would be happy to discuss ways to ensure that your gift is directed to the specific college, department or university program that you designate.
Let Us Know...
Once you have designated Fresno State as a beneficiary of your retirement account, please let us know of your decision. Your future gift automatically qualifies you to become a member of the Heritage Society. Although we strictly comply with requests to remain anonymous, we would be honored to add your name on this exclusive list of individuals who are investing in the future of our great University. Even "anonymous" member listings remind others that there are many great people out there who have included Fresno State in their estate plans.
Planning your estate can sometimes get complicated. Even simple estate plans can have severe tax and other legal consequences. As you review these pages, please remember that there are always exceptions to every rule. We encourage you to seek guidance from a qualified licensed professional such as an attorney or certified public accountant to be certain that your desires are fulfilled without any unwelcome surprises.
How Can Fresno State's Planned Giving Office Be of Assistance?
We are charitable planning specialists and have resources available to support both your investigation and your implementation of gift planning techniques. Our services are professional, conﬁdential and collaborative. They are provided without cost or obligation. We encourage you to call on us to assist you, your family and your advisors in exploring ﬁnancial, estate and charitable planning.
For more information, please contact:
Liz Garvin, CGPP
Director of Planned Giving
5244 North Jackson Ave., M/S KC45
Fresno, CA 93740-8023