These factors combine to create a heavy tax burden.
With thoughtful planning,
you can make tax-wise decisions that
will help you provide for heirs, and make generous gifts to Elderhostel
and other charitable organizations. Naming Elderhostel, a
charitable organization, as a beneficiary of your retirement plan
— or as a recipient of a percentage of your retirement plan
— can make good sense.
Consider two examples:
Susan, 74, is a retired teacher. She makes modest charitable
gifts each year to several organizations. In planning her bequests,
Susan wants to provide for her children and grandchild and three
charitable organizations. Aware that gifts to charitable organizations
will not be taxed, Susan names Elderhostel, her university and
synagogue as beneficiaries of her IRA. She bequeathes the rest
of her estate to her family.
Outcome: Susan accomplishes her goals, leaving the maximum
amount possible to her children and favorite charities, while
incurring no income tax on the gifts from her IRA.
Richard, 69, a widower, has an estate valued at $3.5 million,
including his home. He has $1,000,000 in his retirement plan.
Richard will be withdrawing funds from his plan during his lifetime,
however he expects some funds will remain at his death. His
financial advisor suggests he eliminate his income tax liability
and potential estate tax liability on these remaining funds
by designating charitable organizations as beneficiaries of
his retirement plan, and bequeathing other assets to friends
and relatives. Richard contacts his retirement plan administrator
and names his college, graduate school and Elderhostel as beneficiaries
of his qualified retirement plan.
Outcome: Richard avoids a tax burden while increasing
the amount he can share with the educational organizations he
values and friends and family.
Assets withdrawn from retirement funds can boost your
income.
Some lifelong learners seeking increased retirement income choose
to establish a charitable gift annuity or charitable remainder
trust, or to make a gift to the Elderhostel Pooled Income Fund.
The only way to tap an IRA for this purpose is to: 1) withdraw
funds from the IRA and then 2) make a gift to Elderhostel to
fund one of these life income gifts.
While the withdrawal will be taxed as ordinary income, the
donor will also benefit from a charitable contribution deduction
for a portion of the amount contributed for the life-income
gift. Although this deduction only offsets some of the income
tax, the donor also benefits from increased income — some
of it tax free — for life.
To name Elderhostel as a beneficiary of your IRA or
qualified retirement plan, ask your plan provider for a change
of beneficiary form.