Tax-deferred retirement plan assets are a great source of retirement income but not always a good choice for making gifts to children and grandchildren. Consider using retirement plan assets to endow a scholarship or a professorship or to make a significant and meaningful gift that will support the Medical Foundation. Because of the estate tax treatment of retirement plan assets, the “cost” of the gift to your estate and heirs often relatively small. Naming the Medical Foundation as a beneficiary of your retirement plan could make a substantial difference in the taxing of your estate and the amount transferred to your family.
Retirement plan assets include individual retirement accounts (IRAs) and asset held in accounts under 401(k) Plans, Profit Sharing Plans, Keogh Plans and 403(b) Annuity Plans. Income taxes on retirement assets are deferred but not avoided. Retirement plan assets owned at death in a taxable estate are subject to federal estate tax (and applicable state taxes). In addition, upon receipt of the retirement plan assets by the heir, distributions are subject to federal income tax in addition to applicable state income taxes. As a result, the combined taxes on retirement plan assets given at death to heirs can exceed 65 percent of the total value of the account(s).
Retirement plan assets left to the Medical Foundation qualify for the unlimited estate tax charitable deduction and are not subject to income tax when received by the Foundation. As a result, retirement plan assets are available in their entirety to support your favorite medical programs at UNC. The bottom line is that for each $100,000 in retirement plan assets you leave to the Foundation, the effective after tax “cost” to your estate and heirs could be $35,000 or less.
Naming the Medical Foundation as a beneficiary of your retirement plan account is one of the easiest ways to make a planned gift. Simply call your plan administrator and request a Change of Beneficiary form. In the beneficiary section, list “The Medical Foundation of NC, Inc.” as the primary beneficiary for all or a portion of the account. If you would like your gift directed to a specific program, department or center, just include “for the benefit of…” after the Foundation’s name. Then return the form to your plan administrator and send a copy to us for your records.
Another alternative: Charitable remainder trusts funded with retirement plan assets provide income to one or more beneficiaries for life. The remainder interest would then go to the Medical Foundation upon the death of the final income beneficiary.