IRA and Retirement Plan Beneficiaries
Most retirement plans, including 401(k)s and IRAs, are income tax–deferred, meaning that income tax is not paid until the funds are distributed to you in life, or upon your death. This taxation makes retirement assets among the most costly assets to distribute to loved ones.
Because they are subject to income taxes to your beneficiaries, retirement assets make ideal gifts to tax-exempt charitable organizations such as UT. Otherwise, the income taxes on retirement assets you leave to your loved ones can be as high as 39.6 percent. This means that an IRA worth $100,000 will be worth only $60,400 by the time it reaches them.
On the other hand, the naming of a charity as the beneficiary of retirement assets upon death generates no income taxes. The charity is tax-exempt and eligible to receive the full amount and bypass any income taxes. This means that in the above example, UT would receive the full $100,000 benefit.
|Learn more about the tax benefits of leaving retirement plan assets to charity.|
|Read more about what to consider when choosing beneficiaries for your IRA.|
To name or change a beneficiary, simply contact the administrator of the IRA or retirement plan for a change of beneficiary form. If you would like to name the University of Tennessee Foundation as beneficiary, simply decide what percentage of the plan's value (0–100 percent) you would like us to receive and name us, along with the stated percentage, on the beneficiary form. Then return the form to the administrator of the plan.
For More Information
Consulting an estate planning attorney is a smart investment that can save you and your family money and heartache in the long run. Please seek legal advice before deciding who will get what in your estate plan.
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The information on this website is not intended as legal or tax advice. For legal or tax advice, please consult an attorney. Figures cited in examples are for hypothetical purposes only and are subject to change. References to estate and income taxes apply to federal taxes only. State income/estate taxes or state law may impact your results.