Leaving your retirement assets to charity when you die

| Dec 21, 2017 | Wills, Trusts, And Estate Planning

Many people choose to bequeath a significant amount, if not all, of their estate to charity. This is a popular choice for people who don’t have any living heirs.

However, even people with adult children often believe that they’ve done plenty to help them become productive adults who can comfortably support themselves. Instead, they prefer to focus on leaving a legacy by supporting organizations doing work they believe in. Often, they choose groups they’ve worked with and contributed to throughout their lives.

A significant part of many people’s assets is in retirement instruments like 401(k)s and individual retirement accounts (IRAs). You can choose to donate all or a portion of those assets to nonprofit organizations. It’s essential to do it correctly in order to minimize the taxes that your estate and your heirs have to pay on those assets.

It’s not enough to simply list the charities as beneficiaries in your estate plan. You also have to designate them as beneficiaries with your retirement plan administrator or your employer, if it’s an employer-sponsored plan. You do that just as you designate individuals as beneficiaries, specifying the percentage of the funds that you want to go to each one.

Estate administrators can generally claim a tax deduction for funds left to a nonprofit. They also don’t have to pay income taxes on the amount of the retirement assets distributed to these entities.

As we noted, it’s essential to handle these important donations correctly. Your Arizona estate planning attorney can help you ensure that you’ve chose recognized charities, that they are properly designated in your documents and that everything is done according to Arizona law.

Source: Fidelity Charitable, “Donating retirement assets,” accessed Dec. 21, 2017

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