Qualified retirement plan assets are among the most tax-burdened assets you can own. At death, assets remaining in your IRA, Keogh, 401(k), 403(b) or other qualified plan can be subject to taxes that can claim up to 75% or more of their value.
During your lifetime, the law requires that certain minimum distributions be taken from your retirement accounts after you reach age 70-1/2. These distributions are subject to federal income tax at your current tax bracket. Upon your death, your qualified plan can continue to make distributions to your spouse without incurring estate taxes. When your spouse dies, however, any remaining plan assets that pass to your heirs are subject to estate tax, in addition to income tax. As a result, many donors have decided to re-evaluate their estate plans, donating retirement plan assets to Sarah Lawrence and leaving other assets such as appreciated securities to their heirs.
Ways to give retirement assets include:
- Naming Sarah Lawrence as a beneficiary of your qualified plan
- Taking distributions from your plan and making outright or life-income gifts to Sarah Lawrence that will generate a charitable deduction to offset income tax that will be due on the withdrawal amount.
- Setting up a testamentary charitable remainder trust in your will into which you transfer any residual in your retirement plan—naming your children as income beneficiaries for life or a term of years and Sarah Lawrence as the charitable remainderman. This option will avoid all income tax liability and generate a partial estate tax deduction.