Your retirement plan is designed to benefit you during your retirement. However, you must name beneficiaries for your plan in case you pass away with funds still in your account. Along with family, relatives and friends, a charity may also be named as a beneficiary. This is among the easiest and most tax-wise ways to make an estate gift.
Most retirement plans are income tax-deferred, which means that you are required to pay income tax when the funds are distributed. Similarly, every dollar distributed to your heirs from retirement accounts would be subject to income tax (unless the distribution derives from a Roth IRA). Retirement funds, like other estate assets, may also be subject to estate tax. However, this potential double taxation is avoided when charities such as the USS Missouri Memorial Association, Inc. ("UMMA") receives the funds – no income or estate taxes would be owed and 100% of your gift amount would be available to support the battleship.
Besides tax savings, a gift of retirement assets has other advantages:
- It is easy to arrange. You merely request a beneficiary designation form from your plan administrator. There is no need to change your will or living trust.
- You can designate UMMA as beneficiary of whatever portion you choose. For example, it might be 15 percent of the account. If you have otherwise provided for heirs, you could leave the entire balance to UMMA.
- You retain control of your retirement funds should you need them, and you can change beneficiaries at any time or completely revoke the gift if your plans change.
Outright Gifts of Retirement Assets
If you are over 59 ½ years of age, you might also consider an outright gift from your IRA or 401(k) or 403(b) plan. While the withdrawal will typically be a taxable event, your charitable deduction would offset the taxable income, provided you itemize your deductions.
For more information about naming UMMA as a beneficiary of retirement assets, or if you have already provided for the USS Missouri in your estate plans, please contact Michelle Morihara via email or at (808)455-1600 ext. 313.