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Planned Gifts

Retirement Assets

A gift of retirement plan assets can be a surprisingly easy way to reduce potentially very high taxes and provide support to  St. Lawrence 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 may want to provide payments to loved ones after you are gone.
  • You would like to make a bequest gift to St. Lawrence.

Option 1: Make a tax-free gift with an IRA charitable rollover (New as of 12/18/15)

You can make a tax-free gift from your traditional IRA (other qualified retirement plans such as 401(k)s and 403(b)s are not eligible). You must be at least 70 ½ years old to take advantage of this opportunity. To ensure your gift is tax-free, the gift must be transferred directly from your IRA administrator (Fidelity, Charles Schwab, Vanguard, etc) to St. Lawrence University. The total of all of your rollover gifts in any one year cannot exceed $100,000 per person. A spouse with a separate IRA could also make similar gift(s) totaling up to $100,000 if they otherwise qualify. Here are the steps to this process:

  1. Contact your IRA administrator (Fidelity, Charles Schwab, Vanguard, etc) by phone, their secure online website, fax or mail and indicate that you want to make a Qualified Charitable Distribution (QCD) from your IRA. Click here for a sample letter you can send by mail or fax.
  2. Typically you will be asked to provide three pieces of information.
    1. SLU’s Address: St. Lawrence University, Office of Planned Gifts, 23 Romoda Drive, Canton, NY 13617
    2. SLU’s Federal Tax Identification Number: 15-0532239
    3. Amount of IRA Charitable Rollover gift to SLU: $
  3. In most situations, your IRA administrator will issue a check with the memo line indicating it is from your IRA account. The check will then be mailed directly to St. Lawrence’s Office of Planned Gifts.
  4. Upon receipt, St. Lawrence’s Office of Planned Gifts will send you a letter that acknowledges your IRA Charitable Rollover gift was received and the purpose designated for the gift.

The benefits of an IRA charitable rollover gift include:

  • If you don’t itemize and are not yet required to take your required minimum distribution (RMD), an IRA charitable rollover offers all the benefits of an itemized income tax charitable deduction.
  • If you are age 72* and must take your RMD, an IRA charitable rollover can satisfy your RMD without increasing your income taxes.
  • Supports the important work of St. Lawrence with a tax-free gift.

*Due to the SECURE Act, please know the following: 

  • Anyone born before July 1, 1949 can make an IRA Charitable Rollover gift in 2020 or later and count their gift towards their Required Minimum Distribution (RMD). The required age for both is 70½. There is no change.
  • Anyone born on or after July 1, 1949 can make an IRA Charitable Rollover gift once they are age 70½. However, they won’t have an RMD for their gift to count towards until the year they turn age 72. For example, someone born on July 1, 1949 will have an RMD beginning in 2021 but will be able to make an IRA Charitable Rollover gift in 2020.

 

Option 2: Designate remaining retirement plan assets for St. Lawrence University

You designate St. Lawrence University on your IRA or qualified plan beneficiary designation form the beneficiary of all or a portion of what remains in your retirement plan when the plan ends.

In addition to having the satisfaction of making a significant gift to St. Lawrence, your benefits include:

  1. Your estate is entitled to an unlimited estate tax charitable deduction for the value of your IRA donated to St. Lawrence if your estate exceeds the applicable exemption.
  2. Since St. Lawrence is tax-exempt, a gift to  St. Lawrence from your IRA is not subject to income taxes.*
  3. Preservation of non-retirement plan assets for family.

* The SECURE Act enacted in 2020 prohibits stretching out non-spousal beneficiary distributions from an inherited IRA over the life expectancy of most heirs. Prior to the SECURE Act, this was a popular way to minimize income taxes on inherited retirement assets.

Option 3: Designate remaining retirement plan assets for a life income plan

Alternatively, you can designate that some or all of the assets remaining when your IRA, 401(k), 403(b), or other qualified plan ends be used to fund a gift arrangement that will make payments to family members or other loved ones for the rest of their lives. When the gift arrangement ends, what is left will go to St. Lawrence University.

In addition to having the satisfaction of making a significant gift to St. Lawrence, your benefits include:

  1. A charitable trust or annuity can provide lifetime income that is no longer possible after adoption of the SECURE Act. That law prohibits stretching out distributions from an inherited IRA over the life expectancy of most heirs. The gift portion of your charitable trust or annuity provides an unlimited estate tax charitable deduction if your estate is subject to estate taxes. Such a plan preserves non-retirement plan assets for family.

Because everyone’s situation is different, we encourage you to seek professional legal, estate planning, and financial advice before deciding on a course of action. This information does not constitute legal or financial advice and should not be relied upon as a substitute for professional advice.

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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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