How to Donate Retirement Assets
Donating an IRA or other retirement assets to Nevada SPCA can be a tax-smart estate planning
strategy.
It is always possible to donate retirement assets, including IRAs, 401(k)s and 403(b)s,1 by
cashing them out, paying the income tax attributable to the distribution and then contributing
the proceeds to Nevada SPCA. In many cases, though, there is little to no tax benefit associated
with this type of donation. However, a direct contribution of retirement assets to Nevada SPCA
as part of an estate planning strategy can be very tax efficient. In some situations, it can mean
more funds for charities and heirs alike.
For many people, a retirement account like an IRA or 401(k) may be the most significant source
of assets accumulated in their lifetime. Others may find that, due to their other resources and
investments, they are not in need of all the funds accumulated in their retirement accounts. For
those who wish to give to Nevada SPCA, a natural question is whether they can donate
retirement assets—and if there are any tax advantages for doing so.
Options for donating retirement assets
Donating during your lifetime:
In order to donate retirement plan assets during your lifetime you
would need to take a distribution from the retirement account, include the distribution in your
income for that year, account for any taxes associated with the distribution, and then contribute
cash to the Nevada SPCA—with one exception. People who are age 70 ½ or older can contribute
up to $100,000 from their IRA directly to a Nevada SPCA and avoid paying income taxes on the
distribution. This is known as a qualified charitable distribution. It is limited to IRAs, and there
are other exclusions and considerations as well.
As part of an estate plan:
By contrast, there can be significant tax advantages to donating
retirement assets to Nevada SPCA as part of an estate plan. When done properly, charitable
donations of retirement assets can minimize the amount of income taxes imposed on both your
individual heirs and your estate. Neither you and your heirs nor your estate will pay income taxes
on the distribution of the assets. Your estate will need to include the value of the assets as part
of the gross estate but will receive a tax deduction for the charitable contribution, which can be
used to offset the estate taxes. Because charities do not pay income tax, the full amount of your
retirement account will directly benefit the Nevada SPCA of your choice. It’s possible to divide
your retirement assets between charities and heirs according to any percentages you choose.
You have the opportunity to support a cause you care about as part of your legacy.
Adding Nevada SPCA as the beneficiary of an IRA or 401(k):
When you’re ready, making a Nevada SPCA the beneficiary of your IRA or other retirement assets
is typically straightforward: Fill out a designated beneficiary form through your employer or your
plan administrator. Most banks and financial services firms also have beneficiary forms, or they
can provide you with suggested language for naming beneficiaries to these accounts. Once the
designated beneficiary forms are in place, the retirement assets will generally pass directly to
your beneficiaries (including charities) without going through probate.
If you are married, ask the plan administrator whether your spouse is required to consent. If
required but not done, this could result in a disqualification of the Nevada SPCA as your
beneficiary.
Be clear about your wishes with your spouse, lawyer and any financial advisors, giving a copy of
the completed beneficiary forms as necessary.
Withdrawals from Roth IRAs, Roth 401(k)s and Roth 403(b)s, along with their associated
earnings, are generally free from income taxes if certain conditions are met.