Did you know you can create a legacy at the Florence Melton School, without changing your will or parting with anything now? You can designate the Florence Melton School as a beneficiary of your retirement accounts and benefit from one of most tax-wise ways to support the organization you care about.

Making a gift of assets from a retirement plan, such as an IRA, 401(k), 403(b), or other qualified plan, is easier than you might think. You do not need to modify your will or living trust. You can simply name the Florence Melton School of Adult Jewish Learning as the sole beneficiary of your retirement plan or as one of several beneficiaries. Doing so allows you to make a gift while still providing for family members or other loved ones. At your passing, your gift from remaining funds will be paid to the Florence Melton School in a lump sum, totally tax-free. In the meantime, the funds are available to you should you need them to meet your own needs. And if family circumstances change, you can adjust the portion allocated to the Florence Melton School.

Besides tax savings, a gift of retirement plan assets has other advantages:

  • It is simple to arrange. You request a beneficiary designation form from your plan administrator. There is no need to change your will or living trust.
  • You can designate the Florence Melton School as beneficiary of whatever portion you choose. For example, it might be 10 percent or 35 percent of what is left in your account. If you have otherwise provided for heirs, you could leave the entire balance to the Florence Melton School.
  • Your gift is revocable. You retain full control of your retirement funds should you need them, and you can change beneficiaries at any time.

Taxation of retirement plan assets

Retirement assets are considered ‘non-probate assets’ and generally will pass outside of your will or living trust. However, they still are considered part of your estate, so the fair market value of these assets, along with all of your other estate assets, will be subject to both state and federal estate taxes when your estate is settled.

Your heirs will owe income tax on every dollar they receive from your retirement accounts (unless the distribution comes from a Roth IRA). If your estate is large enough to pay estate tax, it will owe estate tax on these same retirement funds. However, distributions made from your retirement accounts to the Florence Melton School will avoid both income tax and estate tax.

Example of using an IRA to make a gift

Option 1
Give $250,000 from your general estate assets to the Florence Melton School and give the $250,000 left in your IRA to your children.

Income tax savings $0
Net cost of gift to the Florence Melton School $250,000

Option 2
Give the $250,000 left in IRA to Florence Melton School and other assets to your children.

Estimated income tax savings (assuming a 35% combined federal and state tax rate for the children) $87,500
Net cost of gift to Florence Melton School ($250,000 - $87,500)     $162,500

General rule: Upon death, it is better to make charitable gifts with assets from an IRA or qualified retirement plan funds and give other assets, such as cash, securities, and real estate, to heirs.

Outright gifts of retirement assets

If you are over age 70½ you can make a contribution to the Florence Melton School with a Qualified Charitable Distribution (or “QCD”) from your IRA. Simply contact your plan administrator and ask that a Qualified Charitable Distribution be made to the Florence Melton School. Although you will not receive an income tax deduction, you will not be taxed on the QCD withdrawal either. And, even better, if you have required minimum distributions, your QCD will help meet toward those minimum withdrawals without causing income tax for you.

If you are over 59½ years of age, you might also consider an outright gift from your qualified retirement plan. While the withdrawal will typically be a taxable event, your charitable deduction will completely offset the taxable income, provided you itemize your deductions and can claim the full deduction in the year you make the gift.

Because everyone’s situation is different, we encourage you to seek professional legal, estate planning, and financial advice before deciding on a course of action. For more information about making a gift through your retirement plan please contact:

Rachel Chasky
Director of Development and Advancement
1-646-921-0747 x 8
The Florence Melton School of Adult Jewish Learning