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Many people find that their individual retirement accounts (IRAs) or other qualified retirements plans are among their most valuable assets. Did you know that a bequest of a portion or all of your IRA to charity may be better tax planning than simply leaving a bequest to charity in your will?
Here is why: Often 45% of retirement assets are subject to estate tax (top rate in 2007 is 45%) and income tax at death. So, for example, if you are unmarried and have left a gift to Preservation New Jersey in your will, and you are planning to leave your IRA to your children, your estate and beneficiaries may pay more tax than if you had made your charitable bequest from your IRA instead.
First, payments from your IRA are subject to ordinary income tax to the beneficiary who receives them. However, if that beneficiary is a tax-exempt charity, the income tax is avoided. Second, the value of your IRA is included in your estate for death tax purposes. However, a charitable deduction is allowed to the estate for the amount of the retirement benefits you bequeath to charity.
You can name PNJ as beneficiary of a percentage of your IRA by completing the appropriate beneficiary designation form from your IRA custodian or trustee.
Careful planning is the key to success. Naming PNJ or any other charity as beneficiary of your retirement plan should be done only after reviewing your estate plan with your tax advisor. He or she can advise you on the proper way to change the beneficiary designation of your retirement plan, to make sure your charitable intentions are carried out.
The information contained in this document is not intended to be legal or tax planning advice. Please consult your attorney or tax advisor for advice concerning your estate plan.