Funding Charitable Gifts With Retirement-Plan Assets

A very effective way to fund a charitable gift, whether during your life or at death, is with retirement-plan assets. Below are brief explanations of methods you could employ to preserve more of your retirement-plan assets for your loved-ones and for a charitable organization like the Hispanic Assistance Fund.

Provide for your spouse and the Hispanic Assistance Fund
With a charitable remainder trust you can use your retirement-plan assets to provide an income for your spouse after your death and then give the remaining benefits to the Hispanic Assistance Fund. By establishing a charitable trust now with your spouse as payment beneficiary and the HAF as the remainderman, your retirement-plan assets would be paid to the trust at your death, and your spouse would receive a stream of payments for life. Your spouse's payments would be based on the payout rate you selected when the trust was established. At the end of your spouse's life, the trust will terminate, and its principal will be paid to the HAF. With such an arrangement, no estate tax is payable because the trust qualifies for both charitable and marital deductions. In addition, because the charitable trust is a tax-exempt entity, no income tax is assessed to assets transferred to the trust. Of course, payments to your spouse from the trust will be taxed at his/her applicable tax bracket.

Provide for your children and the Hispanic Assistance Fund
Funding a charitable remainder trust at your death with retirement-plan assets can also be an effective way to provide for surviving children, reduce taxes, and make a gift to the HAF. The trust would be written to name your surviving children as beneficiaries, with the HAF as the remainderman. The total benefits received by your children from the trust may be greater than if you had simply left your retirement funds as a lump sum to them. And, in addition, you provide a nice gift to the HAF.

Outright gifts to the HAF
If you, your spouse, or your children do not need the income from a charitable remainder trust, you may want to consider giving all or part of your retirement-plan assets outright to the HAF. Assets remaining in your retirement plan at death are subject to estate and income taxes. If you desire to make a charitable gift, you may want to consider making a withdrawal from your retirement plan and contributing it to the HAF. The charitable deduction you would receive for the gift may offset the income tax incurred from the withdrawal.

Gifts at death to the HAF
Another way for you to make a gift to the HAF from your retirement-plan assets is simply to give us all or a portion of your retirement funds at death. This gift will avoid all taxes, and the cost of such a gift may be as little as 20 cents on the dollar.

It is our desire to help you determine which of these methods may be best for you and your family. We welcome the opportunity to provide you with additional information about any of these methods and to discuss with you how you might consider making your gift. Please call (864) 770-1311 and ask for Daniel Hicks.

The information provided here is not legal tax advice. Please consult with your professional advisors about estate planning strategies applicable for your specific situation.