June 1, 2023

Using Your Retirement Plan to Fund Your Legacy Giving

Image on blue background reading Tax Smart Legacy Planning

In a recent blog post, we discussed the tax benefits of making lifetime gifts to certain charitable beneficiaries using qualified charitable distributions. While qualified charitable distributions can be great tools for lifetime giving, you can use your traditional IRA or qualified retirement plan in other ways to make tax-efficient gifts to the nonprofit organizations you want to support.

Using the Right Assets Can Minimize Taxes

If your estate plan goals include both charitable giving and bequests to your children or other heirs, the assets you designate for each type of bequest can make a difference. Public charities typically do not pay income tax when they receive donations. However, your children or other heirs could be required to pay a significant amount of tax upon receiving funds from your traditional IRA or qualified retirement plan.

This means it may be more tax effective to fund any charitable bequests from your retirement plans while funding bequests to your children and heirs with assets that will not be immediately taxable to them (for example, appreciated stock that is eligible for a step-up in basis at the time of your death). Your advisor can help you determine what will make the most tax sense in your circumstances.

Naming a Nonprofit as Beneficiary

One of the simplest ways to use your retirement funds to support a nonprofit is naming the organization (or specific funds it holds) as the beneficiary of your plan. You can do this by simply updating the beneficiary designation forms for your account or plan. You also may want to contact the organization to let it know you have designated it as beneficiary of your account or plan and provide it with guidance on how you would like it to use the funds it receives.

Let Us Know if We Can Help

Our donor engagement team frequently assists donors who want to establish or contribute to funds at MCF. Whether you are interested in making a legacy bequest from your IRA or retirement plan or would like to explore other types of legacy giving, we can help you provide permanent support for the organizations and causes that are meaningful to you.

If you’d like to learn more, please contact us.

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