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Retirement Plans and IRAs: Tax-Deferred Options

Retirement PlansUsing the standard designation form that includes the participant’s name and social security number, a donor may direct the primary beneficiary, such as At my death, the balance in full shall be distributed in a lump sum to Hospice of Marion County.

If an IRA distributed to an estate transfers a specific amount to Hospice of Marion County, the estate will incur a taxable gain. The solution is either to distribute directly from the IRA to Hospice of Marion County or to transfer a fractional portion of the IRA or pension plan from the estate.

Another alternative is to transfer the plan assets or substantial IRA to a testamentary charitable remainder trust (CRT), which can then make distribution of income to heirs for a term of years, with the remainder to Hospice.

A partial estate tax deduction would be incurred based on the payout percentage and the selected term of years with the trust qualifying as a CRT. The total amount of the IRA distributed to the trust can be reinvested with the earnings paid to the heirs for the selected term. At the end of the term, the trust principal, comprised of the untaxed ordinary income originally contributed to the IRA plus untaxed growth, passes with no income tax to Hospice of Marion County.

How it helps you:

  • Tax-free to charity, whereas retirement funds can be taxed when passed on to your heirs
  • Avoid all federal and estate taxes when Hospice of Marion County is named primary beneficiary
  • Receive partial savings when you give Hospice of Marion County a specific amount before giving the remainder to your heirs
  • Name Hospice of Marion County as the contingent beneficiary, allowing for greater flexibility
  • Donate retirement plan assets, which could be the most cost-effective gift