It probably would not surprise you to learn that over 42% of Americans own an IRA.
In many cases, IRAs –especially for people who have rolled over one or more employer retirement plans– represent a significant portion of a household’s net worth. When it comes to charitable planning, IRAs should never be ignored. Indeed, your IRA may offer some of the best opportunities to support the causes you care about.
For starters, no matter what your age, consider the benefits of changing the beneficiary designation on your IRA to name your fund at the San Antonio Area Foundation as the recipient of all or a portion of the account. This is an easy, tax-effective way to leave a bequest to support the causes you care about. The Area Foundation can help you structure the terms of your fund to match your intended charitable legacy. For example, you can make arrangements for your children to serve as advisors on the fund to recommend grants to particular areas of interest.
The reason an IRA beneficiary designation is such an ideal form of charitable bequest is because of the tax advantages. Dollars flowing to the Area Foundation from an IRA are not subject to estate tax. In addition, as a public charity, the Area Foundation does not pay income taxes on the IRA assets it receives. Plus, the IRA assets would be included in your estate for estate tax purposes.
Exploring ways to give your IRA to charity can also serve as a helpful reminder to review all of your beneficiary designations. Although they may appear to be innocuous and may even be easy to overlook, those beneficiary designation forms represent critical components of your estate plan.
To understand this, you need look no further than the cautionary tale of a Procter & Gamble employee who died in 2015, leaving behind a retirement plan. Way back in 1987, the employee had named his girlfriend as the beneficiary of his retirement plan. Despite their relationship ending, the employee never updated the beneficiary designation. By the time the employee died, the retirement plan, which had grown to nearly $1 million, passed via the beneficiary designation to the ex-girlfriend.
Finally, if you have reached the age of 70 ½, you can make what’s known as a Qualified Charitable Distribution (QCD) from your IRA directly to certain charities, including a designated fund or a field-of-interest fund at the Area Foundation – up to $105,000 per year per spouse. You won’t pay income tax on the distribution and, happily, if you’ve reached the age for Required Minimum Distributions, your QCDs count toward those distributions.
The upshot? Next time you review your financial and estate plan with your advisor, take a close look at your IRAs. If you intend to leave a charitable legacy, or if you’d like to support your favorite organizations during your retirement years, your IRA may be your best bet to make a big difference in the causes you care about.
Want to discuss linking your IRA to the Area Foundation for charitable purposes? Have other questions about different ways to give back to the community? Our Development and Donor Services Department is here to help! Just click here to get started or you can call us at (210) 225-2243.
