Gift Planning
Resources and Information for
Retirement assets
A gift of retirement plan assets can be a surprisingly easy way to reduce potentially very high taxes and provide support to Bucknell University.
A gift of retirement plan assets could be right for you if:
- You have an IRA or qualified retirement plan, such as a 401(k) or 403(b)
- You do not expect to use all of your retirement plan assets during your lifetime
- You have other assets, such as securities and real estate, that you want to pass to heirs
- You want to provide payments to loved ones after you are gone
- You would like to make a gift to Bucknell at your death
Several options exist for using your retirement assets in support of Bucknell, such as:
Make a Qualified Charitable Distribution (QCD) from your IRA
If you have an IRA and are 70 ½ or older you can transfer up to $105,000 in 2024 to Bucknell tax-free.
The benefits of a QCD include:
- Gifts make an immediate impact to the Bucknell program or area of your choice
- Gifts count toward your required minimum distribution (RMD) now beginning at age 73
- Gifts are not included in, and therefore not taxed as, income for federal tax purposes
- Simulates an itemized income tax charitable deduction for non-itemizers
Name Bucknell beneficiary of your retirement plan
Designating Bucknell as recipient of some or all of what’s left in your IRA, 401(k), 403(b) or other retirement plan is easy—there is no need to change your will or living trust.
The benefits of naming Bucknell beneficiary of retirement plans include:
- Supporting the Bucknell program or area of choice at your death
- Recognition of your legacy gift through membership in the Bertrand Society
- If charitably inclined, directing non-retirement assets to heirs and retirement assets to Bucknell may result in less tax for heirs
Direct retirement plan assets remaining at your death to fund a charitable life income plan
Designating remaining retirement assets to a life income plan, such as a charitable gift annuity or charitable remainder trust creates an income stream for family members or other loved ones. The amount remaining after their lifetimes supports the program or area of your choice at Bucknell.
The recently enacted SECURE Act significantly limited the benefits of a previously popular planning technique referred to as the “stretch IRA.” Prior rules allowed those who inherited an IRA to “stretch” withdrawals from the account over their lifetime. Now, inherited IRA distributions for non-spousal beneficiaries must be received, and taxed, over a maximum of 10 years rather than “stretched” over their lifetime. Directing retirement assets to fund a charitable life income gift can produce an income stream for heirs in place of the no longer permitted “stretch IRA.”
IRAs and qualified retirement plans
With the exception of the Roth IRA, money used to fund a qualified retirement plan, such as a traditional IRA, 401(k), or 403(b), has never been taxed and invested assets in the plans grow tax-deferred. Consequently, withdrawals from any of these plans (except for the Roth IRA) are taxed as ordinary income. Federal income tax alone on withdrawals from these plans could be as high as 37%.
Withdrawals are taxed as income
With the exception of the Roth IRA, money used to fund a qualified retirement plan, such as a traditional IRA, 401(k), or 403(b), has never been taxed and invested assets in the plans grow tax-deferred. Consequently, withdrawals from any of these plans (except for the Roth IRA) are taxed as ordinary income. Federal income tax alone on withdrawals from these plans could be as high as 37%.
Withdrawals are required once you reach 73 years old
Withdrawals from your qualified retirement plan become mandatory once you reach age 73. The amount you must withdraw each year is a percentage of the value of your retirement plan as of the last day of the previous year and increases with age according to a schedule published by the IRS.
Taxes on remaining retirement assets can be very high
Your family members and other heirs will have to pay income tax on distributions received from your retirement plan at your death. In addition, retirement plan account values are included for calculating estate taxes so, in large estates, your retirement plan may increase the federal estate taxes owed.
Federal income tax can be as high as 37% and when combined with estate tax can total 62% or more. Many states assess their own taxes on estates, often at a far lower threshold than federal estate taxes.
Give retirement plan assets to Bucknell and lower tax potential assets to heirs
Since most retirement plans hold assets purchased with money that has never been taxed, these plans are more highly taxed when received by individuals; retirement assets received by Bucknell are not taxed due to the University’s charitable status.
Example
Samuel, 75, is a retired business executive who has accumulated $500,000 in the retirement plan that he set up through his company years ago. He takes minimum distributions from his plan in order to preserve as much tax-free growth inside the plan as he can. At this rate, he expects that his account may still be worth $500,000 when he dies.
Samuel has reached the time in his life when he has begun thinking about the legacy he wants to leave behind after he is gone. He decides to create a named endowed fund that will last in perpetuity. To accomplish this goal, he designates 40% of the final balance in his retirement account to Bucknell.
Benefits
- There will be no income tax or estate tax on the $200,000 of Samuel's retirement plan assets that are transferred to Bucknell University. If Samuel were to pass the same amount to his family and make his charitable gift with stock instead, his family would owe income tax of $74,000 (37% bracket) on the IRA assets, leaving only about $126,000 for their own use. There would be even greater tax savings if Samuel's estate were large enough to pay estate tax.
- Samuel has ensured that a permanent endowment bearing his name will support Bucknell long after he is gone.
- Samuel will be recognized as a Bertrand Society member during his lifetime.
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