Retirement Assets

IRAs and qualified retirement plans
Retirement plan assets are a major source of wealth for many households. For example, you may have hundreds of thousands of dollars invested in your IRA, 401(k), 403(b), or other qualified retirement plan. These plans do not pay tax on the income and capital gain realized by their investments. This allows their assets to grow faster than if you held and invested these assets outside of your retirement plan.

The primary purpose of your retirement plan is to provide you with income during your retirement, but it can also be an excellent source of funds for making charitable gifts during your life and when your plan ends.

Withdrawals are taxed as income
With the exception of the Roth IRA, the money used to fund a qualified retirement plan, such as a traditional IRA, 401(k), or 403(b), has never been taxed. Also, earnings that occur within a qualified retirement plan are not taxed. As a consequence, withdrawals from any of these plans (except for the Roth IRA) are taxed as ordinary income. Your federal income tax alone on a withdrawal from one of these plans could be as high as 37%.

Withdrawals are required once you reach 72 years old
You must start taking withdrawals from your qualified retirement plan once you reach 72 years old. 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. The percentage starts below 4% for someone who is taking their first “required minimum distribution” 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 any distributions they receive from your retirement plan after you are gone. In addition, your qualified retirement plan is included in your estate, so if your estate is large enough to owe estate tax, your plan may increase the estate taxes you owe. 

Federal income tax alone can be 37%. When you add federal income tax and estate tax together, they can total 62% or more. In states that assess their own taxes on estates, the total taxes on retirement plan assets paid to heirs can be over 62%.

Give retirement plan assets to St. Lawrence University and save taxes
In contrast to your retirement plan assets, your estate will not owe income tax on most of its other assets in addition to estate taxes that may be due. As a result, your estate and heirs will pay lower taxes if you pass your less heavily taxed assets to your heirs, and give your retirement plan assets to charity. Paying lower taxes will mean that more assets will reach your heirs. How much more will depend on the size of your estate, where you live, and the type of gift you make.

How do I make a gift of retirement plan assets to St. Lawrence? 
You have several good options to make a gift of your retirement plan assets to us.

Option 1: Make a tax-free gift today with an IRA charitable rollover 
You can make a tax-free gift by directing the administrator of your traditional IRA or Roth IRA to transfer funds directly from your plan to St. Lawrence. You can instruct your IRA administrator to transfer the funds directly to St. Lawrence or to send you a check that is made out to St. Lawrence University.

When you make an IRA charitable rollover gift, you won’t need to include the transferred funds in your income for that year and therefore will not pay any tax on them. If you were to withdraw the funds yourself and then make a gift to us, you would have to include the withdrawal in your income. Even if you take an offsetting income tax charitable deduction, the result could be more income tax for you to pay overall. You cannot make a IRA charitable rollover gift from other qualified retirement plans, such as SIMPLE or SEP IRAs, 401(k)s, or 403(b)s. 

Another great feature of an IRA charitable rollover gift is that it counts toward the amount you are required to withdraw from your IRA for the year (your “required minimum distribution”), If you don’t need these funds for your own use, you can use them to make gifts to St. Lawrence and your other favorite charities and avoid paying income tax on these withdrawals. 

The benefits of making an IRA charitable rollover gift include:

• If you don’t itemize and are not yet required to take your RMD, a QCD offers all of the benefits of an itemized income tax charitable deduction.
• If you are age 72 and must take your RMD, a QCD can satisfy your RMD without increasing your income taxes.
• You have the satisfaction of providing immediate support to St. Lawrence.

There are several requirements you must meet in order to make an IRA charitable rollover gift to St. Lawrence:

• Your distribution must be from your IRA or Roth IRA.
• You must instruct your IRA administrator to make a distribution directly to St. Lawrence.
• You must be at least 70 ½ years old.
• The total of all your qualified charitable distributions for the year must be no more than $100,000.
• Your distribution cannot be made to a donor advised fund, private foundation, or supporting organization.
• You cannot receive any benefit in exchange for your gift.

Option 2: Designate remaining retirement plan assets for St. Lawrence University
The simplest and most common way to give retirement plan assets is to make our organization a beneficiary of your retirement plan. All you need to do is to file a revised beneficiary designation form with your retirement plan administrator to designate our organization as a beneficiary of your plan and name the percentage of your remaining assets that you want us to receive.

The retirement plan assets that you designate for us will avoid all income tax and estate tax. In order for your estate to enjoy both of these tax benefits, it is especially important that you make our organization the designated beneficiary of these retirement plan assets, not your estate. .

Please identify us on the form with our legal name: St. Lawrence University, 23 Romoda Drive, Canton, NY 13617 and include our Federal Tax Identification Number: 15-0532239

Option 3: Designate remaining retirement plan assets for a life income plan
Prior to the passage of the Secure Act in 2020, inherited IRAs could stretch out their taxable distributions over the life expectancy of your heirs.  The Secure Act requires an inherited IRA to distribute all of its assets within 10 years.  With the elimination of the stretch IRA, an attractive option for planning so that inherited retirement plan assets can pay income for life is to designate a charitable remainder trust or charitable gift annuity as the beneficiary of your retirement plan. Passing assets to us through a life income plan allows you to provide income to your loved ones after you are gone and then provide support to us. Such a plan strikes a balance between leaving all of your retirement plan assets to loved ones subject to significant taxation and leaving all of these assets to us and eliminating taxes on them altogether. Here's how a life income plan works:

• Your retirement plan transfers the designated portion of its final balance to a charitable remainder trust or a charitable gift annuity. 
• The heirs you have chosen receive payments from the plan each year, typically for life. 
• When the life income plan ends, its remaining principal goes to support St. Lawrence University.

Life income plan options 
There are several life income plan options to choose from. The one that is right for you will depend on a variety of factors. Please contact us if you would like to learn more about funding a life income plan with assets from your retirement plan.

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