Retirement Plan Assets

Tax-deferred retirement plans, such as IRAs and 401(k) and 403(b) accounts, are a major factor in financial, estate, and gift planning due to their tax-deferred nature. Since the tax is deferred on these assets, at death they are potentially subject to both estate taxes and income taxes. If the transfer of the retirement accounts to the surviving family members is not handled properly, the retirement assets could be subject to as much as a 37% tax rate, or even higher if estate taxes and state income taxes are applicable.

As a result of this tax pitfall, many individuals use retirement plan assets to make gifts to Wheaton College. Since Wheaton College is a tax-exempt organization, the retirement plan assets avoid both estate and income taxes, thus preserving more of the assets for the support of the ministry of the College. 

The most efficient way to give retirement plan assets to Wheaton College at death is by naming Wheaton College as the beneficiary or contingent beneficiary on the retirement account beneficiary designation. The beneficiary designation can be for a percentage or a fixed dollar amount of the retirement account. You can also insert instructions into your will or revocable living trust stating that, in the event retirement assets flow into the estate or trust, charitable contributions should be made first from the retirement plan assets before any other assets are used. Fulfilling charitable bequests with retirement account assets avoids the potential taxes on these assets.

Individuals over age 70.5 may also give from their Individual Retirement Accounts during their lives. They are allowed to annually give up to $105,000 from their IRAs directly through Qualified Charitable Distributions.