An extremely tax-efficient way to “pay it forward” is to name The Community Foundation as the primary, contingent or partial beneficiary of your qualified retirement plan, including 401(k) plans, traditional IRA accounts and 403(b) plans.
When retirement assets are distributed to non-charitable beneficiaries, such as family, friends or to an estate, the distributions are taxed to the recipient at his or her marginal income tax rate, reducing the overall benefit by up to 39.6% federally, plus the applicable state tax. In contrast, since The Community Foundation is a tax-exempt organization, a gift of retirement assets to us will not generate any taxes at all, ensuring that there is a dollar for dollar benefit from the gift. This is why people who plan to make a legacy gift to a charitable organization often do so via retirement assets, freeing up other, more tax-efficient estate assets for family members and/or other beneficiaries.
Designating The Community Foundation as a beneficiary is straightforward and hassle-free, and we’re here to help. The first step is to contact your retirement plan administrator for a change of beneficiary form. Using the form, you may choose the manner in which you’d like to benefit the Foundation, including:
- Naming us as your primary beneficiary for a percentage (1-100%) of your retirement plan assets;
- Naming us as the beneficiary of a specific dollar amount to be paid to us before the remainder is divided among other beneficiaries;
- Naming us as the beneficiary of the balance of the retirement plan, but only after your other beneficiaries receive a specified dollar amount; or
- Naming us as your contingent beneficiary to receive the balance only if your primary beneficiary doesn’t survive you.
If you’ve already included the Foundation as a beneficiary of your retirement plan (or included us in your estate plans in some other way), please let us know. We’d like to thank you and include you as a member of our Legacy Society. For more information, feel free to contact Maegan Vallejo.
Contributed by Randi Grassgreen, ESQ., Director of Family and Wealth Planning for Crestone Capital Advisors, LLC and Trustee of The Community Foundation
Note: The information presented here is not exhaustive and is not intended as tax advice. Please consult a qualified tax professional regarding your specific circumstances.
