Planned Giving

Gifts of Retirement Assets

Contributions to retirement plans can provide an excellent opportunity for growth as they grow tax free. The increased earnings are not taxed annually. They continue to grow.

If the ultimate beneficiary of your retirement assets (e.g., your individual retirement account (IRA), 401(k) plan, profit-sharing plan, pension plan, or Keogh plan) is an individual, the beneficiary (even if the individual is your spouse) generally must pay income tax on the receipt of your assets. Additional savings can occur if the recipient is in a lower tax bracket when the funds are withdrawn (for example, during retirement) than when the investments were growing.

Coordinating retirement planning and charitable giving can be especially beneficial if you have accumulated substantial retirement assets and wish to reduce income and estate taxes. The rise in the value of the assets held in qualified retirement plans has created new challenges and opportunities.

Retirement accounts are often subject to income taxes and estate taxes at a combined marginal rate that can be 75% or higher on large taxable estates. This is because when someone participates in a traditional retirement plan dies and the funds remaining in the plan are distributed, the funds pass to their estates as "IRD" income - "income in respect of a decedent." IRD assets are subject to both income and estate taxes.

With this in mind, many advisors recommend that, to the extent you are going to be charitable through your estate plan, satisfy these commitments by giving assets through your qualified retirement assets.

Your decision is revocable because you may change the beneficiary designation at any time.

Upon death, your account can pass directly to the AFBIU as your primary beneficiary, or it can be transferred to a deferred giving arrangement that will pay an income for life to someone you name, after which the remaining assets pass to the AFBIU.

Notice: Consult your legal and tax advisors before making any material decisions based on this information.

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