Donating IRA Assets to Charity: What You Need to Know

Donating IRA Assets to Charity: What You Need to Know

Donating IRA Assets to Charity: What You Need to Know

By Janet Zinke
Senior Development Officer
Dakota Boys and Girls Ranch

When I talk to people about their estate plans, I often recommend they consider using their Individual Retirement Accounts for their charitable gifting. These include qualified pension plans, profit sharing plans, 401(k)s, 403(b) tax sheltered annuities, SEP, Keoghs, IRAs and stock option plans. These assets are considered "income in respect of decedent (IRD)."

When you leave these assets to someone other than your spouse, you may subject them to significant taxes. Even if you do not have a taxable estate, the tax rate on an IRD can exceed well over fifty percent.

If you plan to include charitable gifts in your estate plans, consider leaving your cash and other investment assets to your heirs, while naming a charity like Dakota Boys and Girls Ranch as the beneficiary of your IRD assets. Why? Charities are tax exempt and, unlike your heirs, will not pay taxes on retirement plan assets. While other assets, like your home and stocks, can be sold by your heirs with little or no tax due.

Naming a charity as the beneficiary of your IRD is easy. Contact your plan administrator for a beneficiary designation form you can complete and return. It's as simple as that!

Another planning option for IRA assets is to fund a testamentary charitable gift annuity that leaves your heirs fixed payments. This type of gift is appropriate when your heirs would benefit from payments that never change. A gift annuity is a simple contract so it is very cost effective to establish. It also may be funded with a smaller amount than a typical charitable trust.

If your IRAs have significant value, you may be interested in a Charitable Remainder Trust, sometimes called a "Give it Twice Trust." Funding a charitable remainder trust with your retirement assets will pay your loved ones income over a number of years, with income tax paid over time, as opposed to facing a large tax bill all at once. At the end of the trust, any remaining principal will go to the charity you name. By choosing Dakota Boys and Girls Ranch as the beneficiary of a charitable remainder trust, you can leave a legacy of loving care for the troubled, complicated, and amazing children who walk through our doors.

If you are 70½ or older, you can make a gift of up to $100,000 from your IRA this year to help our ministry. Making direct charitable gifts from your IRA is one of the best ways to give, and it is simple to do! Gifts from your IRA are not reportable as taxable income and, therefore, are not included in your adjusted gross income. Contact your IRA administrator to make a gift from your IRA or contact us to learn more.

If you are interested in an illustration of how any of these options would work for you, please contact the Dakota Boys and Girls Ranch Foundation at 1-800-344-0957.

We aren't tax experts, but we can provide you with examples and information to share with your most trusted financial advisor.


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