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The day for retirement is finally here – regular paychecks stop. For many people, their financial future will revolve around their retirement plan assets. But what happens to the remaining retirement assets after the individual is gone? 

In many cases, the retirement plan may be the most heavily taxed asset owned, subject to both income and estate taxes. Upon the death of the plan's owner, those assets generally will be included in the gross estate for federal taxation purposes. If left to pass to the heirs, not only will income taxes be due, but estate taxes may also need to be paid. Taxes could consume a substantial part of the account's value.  (If married, the spouse can delay these taxation consequences until the time of his/her passing.) 

Many of these taxes could be avoided by using retirement assets to fund a gift to charitable organizations that were important to the individual during their lifetime, such as Children's Hospital and Health System. Consider these options:

• Name a charitable organization(s) as the beneficiary of a qualified retirement plan. The estate will get a charitable deduction for the entire amount, and no income taxes will be triggered because the charity is tax-exempt.
• Use annual distributions from the plan to fund a charitable gift annuity with Children's Hospital and Health System Foundation. Guaranteed fixed annual payments from the gift annuity will be received, and the charitable deduction will help to offset the taxable income from the distribution.
• Create a tax-exempt charitable remainder trust and name this trust as beneficiary of the retirement plan. After the owner's death, the trust can pay income to the heirs during their lifetimes or for a certain period of years. Income taxes will be spread over this period, providing much greater tax deferral than would otherwise be available. The remainder of the trust assets are then distributed to the charitable organization(s) named as beneficiary.

If you, or a client of yours, would like to benefit both family and favorite charities, consider using retirement assets for the charitable gifts and leaving other nontaxable assets to for loved ones.

For more information on this or other ways to include Children's Hospital and Health System in an estate plan, contact Kelly Sachse, planned giving director, at (414) 266-6121, toll free at (888) 543-7233 or at ksachse@chw.org. All discussions are confidential.

The information on this site is not intended as legal, tax or investment advice.
For such advice, please consult an attorney, tax or investment professional.