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Pulling Retirement Cash, but Not by Choice

Baby boomers’ mandatory withdrawals from 401(k)s, IRAs and other tax-deferred retirement accounts start in full force this year, touching off a massive shift of cash

January 24, 2017 View the orginal article on wsj.com

GUEST COMMENTARY: Estate planning for charity helps cut taxes

August 30, 2015 12:15 am  •  Carolyn Saxton

Carolyn Saxton

Legacy Foundation, Lake County’s Community Foundation, offers donors a number of giving options to help them meet their charitable goals. The easiest is through a bequest or, simply put, a will. But, there are a couple of central questions the donor needs to answer, including, “What assets should I leave?”

Recently I met with a Lake County donor I will call Ed. Ed was planning to leave a bequest to Legacy Foundation through his will. He was interested in fostering programs that benefit his neighborhood but also educational programs that teach children about protection of our environment.

Ed wanted to make an initial gift before his death so he could see his charitable dollars at work while he was still living. So with an initial contribution Ed made that day, we established a permanent fund in his name. He designated several not-for-profits he wanted to support which would receive annual distributions from the fund during his lifetime.

Separately, in conversations with his attorney, Ed has directed in his will that upon his death whatever is remaining in his IRA will come directly to his fund at Legacy.Those same programs he designated for support during his lifetime will receive perpetual support long after he is gone.

What are the benefits of Ed's decision?

First, Ed will receive a charitable tax donation for his initial gift and see his gift in action. However, just as importantly, bequests from IRAs and qualified retirement plans represent a donor’s charitable gift asset with the best tax advantage. The full value of IRAs (and other qualified retirement plans) is subject to state and/or federal estate taxes. These taxes, which can go as high as 40 percent, will be due when distributions to individual heirs are taken and calculated into the estate’s income.

View Article on nwi.com

Carolyn Saxton is president of Legacy Foundation. Contact her at csaxton@legacyfdn.org or (219) 736-1880. The opinions are the writer's.