Gifts and Bequests of Retirement Assets

Many individuals hold a significant amount of their wealth in their tax deferred retirement account, such as an IRA or 401(k). Assets held in these accounts grow tax-free over time but when distributed are subject to income tax. The income tax liability occurs when the assets are taken out of the retirement account, either by the owner making a withdrawal of assets during life, or when the account is distributed upon the account owner’s death.

There are two exceptions that are important to note, the income tax liability is deferred if the owner’s spouse is named as the beneficiary of the account and the income tax liability is eliminated when a tax-exempt charitable organization is named as the beneficiary.

Naming Taltree Arboretum & Gardens as the beneficiary of your retirement account can be advantageous for both estate and income tax purposes. The Arboretum, as a tax-exempt organization, does not pay income tax when the assets held in the tax deferred retirement account are distributed to the Arboretum upon the death of the account owner. If the account owner’s estate is subject to estate tax, the estate receives an estate tax charitable deduction for the value of the account that names the Arboretum as the beneficiary.

By fulfilling charitable intent and naming the Arboretum as the beneficiary of a tax deferred retirement account, this will free up other assets that do not have a built-in tax liability for your other non-charity beneficiaries. It is a win-win situation for everyone.

It is important to note that in order to give a retirement account to the Arboretum upon death, you should complete a beneficiary designation form with the custodian of your retirement account.

If you are interested in learning more about Gifts and Bequests of Retirement Assets, please contact the Office of the President & CEO at (219) 742-5349.

The material presented here is not offered as legal or tax advice. We recommend you seek the advice of your tax advisor, attorney, and/or financial planner to make certain your considered gift fits well with your overall circumstances and planning.