Bequest of Retirement Plan


A gift of retirement plan assets is a gift arrangement where IRA or other “tax-qualified” plans are given to a charity – usually after the death of the plan owner. As with any estate asset, retirement plans are subject to a transfer tax at death. This alone can reduce the amount heirs receive by as much as 55 percent. However, the estate tax is not the only cause of erosion. Because the law characterizes these assets as “Income in Respect of a Decedent” or IRD, retirement plan assets are also subject to income tax at death. Combined, the total tax at death can dramatically reduce a retirement plan’s value.

How does it work?

Retirement plan assets can be used to fund bequests by simply naming a charity as a secondary beneficiary of those assets. Or, you could establish a charitable remainder trust in your will and name someone as a lifetime income beneficiary, with a charitable organization receiving the remainder. If a spouse is the income beneficiary, the marital deduction eliminates any estate tax on retirement plan assets; plus, because the trust is tax-exempt, it will not be taxed on the retirement plan assets placed in the trust, so no income tax will be due. The total tax savings on a large retirement plan can be enormous.

What are the benefits?

  • Eliminates the income tax imposed on the retirement plan beneficiary.
  • Reduces estate taxes by removing the asset from the taxable estate.
  • Allows other estate assets to pass to heirs without the burden of income taxes.
  • Can provide a lifetime income (via charitable trust) to a spouse or other heir, and escape the income tax imposed on the plan beneficiary.

Next Steps

If you have questions or to advise us of your desire to transfer mutual fund shares, closely held or restricted stock, or to create a planned gift using securities, please contact:

Daniel K. Wiseman, CFRE
Director of Advancement for Planned Giving Haggai International
4725 Peachtree Corners Circle
Suite #200
Peachtree Corners, Georgia 30092-2553
Office: (770) 810 – 1388
E-mail: DanW@Haggai-International.org

DISCLAIMER: The information contained on this page is for educational purposes only. The reader understands that Haggai International is not rendering legal advice and that the reader should seek independent legal counsel when contemplating estate planning decisions.

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