Qualified retirement plan assets are among the most tax-burdened assets you can own. If you die before you have taken most of your distributions from your IRA, 401(k), Keogh, SEP or other qualified plan, the balance remaining in your plan can be subject to confiscatory taxes that can claim 75% or more of its value.
During your lifetime, the law requires that certain minimum distributions be taken from your retirement accounts after you reach age 70.5 years. These distributions are subject to federal income tax at your current tax bracket. Failure to take the required amount results in a 50% penalty tax on the undistributed amount.
Upon your death, your qualified retirement plan can continue to make distributions to your surviving spouse without incurring estate taxes. When your spouse dies, however, any remaining plan assets are treated as Income in Respect to a Decedent (IRD) and become subject to multiple levels of taxation.
This can create a scenario in which only 10 to 15 percent of the amount is available for one's family or loved ones. Why give your hard-earned retirement assets to the federal government when you can give them to BCD instead?
There are several ways to do this:
- Name BCD as the primary or secondary beneficiary of your plan.
- Take structured withdrawals from your plan beginning at age 59.5 or age 70.5 and make outright or life-income gifts to BCD that generate an offsetting charitable deduction.
- Set up a testamentary Charitable Remainder Trust in your will into which you transfer any residual in your retirement plan at your death, naming your surviving spouse or children as income beneficiaries for life or a term of years and BCD as the charitable remainderman. This approach will avoid all IRS income tax liability and generate a partial estate tax deduction.
For more information about making a bequest to BCD, please contact your tax advisor.
