There are several types of plans. Many of these have wonderful benefits for the gift donors. Families can enjoy increased income and generous tax savings.
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Major IRA gift. In order to illustrate what can happen, assume a person has a large estate and a qualified retirement plan totaling $1,000,000 at death. Unaware of the tax consequences, Mr. Donor has bequeathed this asset directly to his children. What is often overlooked is the multiple tax bites that may occur in a situation like this. It is clear that retirement planning incentives have been designed to create funds for retirement, but not designed to create funds for inheritance.
An IRA to children may result in as little as 30% of the funds reaching the children. However, just as our tax laws encourage retirement planning, they also contain attractive benefits when charitable organizations are on the receiving end of qualified retirement plans.
For those with charitable intent, it is often attractive to consider a bequest of either a portion or all of the funds in a qualified retirement plan to charity.
A bequest to save taxes. For illustrative purposes only: A donor was a widow with two grown children. She had a great love for the work of a special charity and wanted to include a charitable gift in her estate plan. Her estate included some stocks, real estate and savings bonds. She learned that if she gave her savings bonds to her children, very little would be left for her family after paying estate and income taxes. Her attorney recommended that she give the appreciated stock and real estate to her children, because these assets would receive a step-up in basis in her estate. The children could then sell these assets immediately and pay little or no tax. At the advice of her attorney, she designated the charity as the beneficiary of her savings bonds. It was a delight to her to know that she could make a tax-friendly gift to her children, and her estate would receive a charitable deduction for the gift.
Bequests. You also may want to make it easy and convenient to have a bequest included in your will. The language below shows how a bequest can very easily be included in your will. You might find it helpful to print this page. You may feel free to give this page to your attorney. If he or she has any questions, please have them contact Eileen Richardson at phone number (650) 462-1795 or e-mail at eileen.richardson@gmail.com
Example bequest language - Please feel free to change the numbers or percentages as you desire.
1. Bequest of cash
"I bequeath the sum of $10,000 to Peninsula Healthcare Connection of Palo Alto, CA.”
2. Bequest of a percent of the estate
"I devise and bequeath 20% of the remainder and residue of property owned at my death, whether real or personal, and wherever located to Peninsula Healthcare Connection, Palo Alto, CA."
3. Contingent Bequest
"If my brother John Doe survives me, I devise and bequeath 20% of the remainder and residue of property owned at my death, whether real or personal, and wherever located to John Doe. If John Doe does not survive me, then I devise and bequeath 20% of my residuary estate, whether real or personal property and wherever located to Peninsula Healthcare Connection, Palo Alto, CA."
