Donating Retirement Assets

A Better Way to Give

Did you know donating all or part of your unused retirement assets is an easy and excellent way to make a gift to The Friends?

If you are like most people, you probably will not use all of your retirement assets during your lifetime. You can make a gift of your unused retirement assets to help further The Friends mission.

Why it's beneficial for you to give retirement assets:

Your heirs will avoid income tax on any retirement assets funded on a pre-tax basis, and
Your estate will receive a deduction on estate tax and avoid potential estate tax on retirement assets.

Making a gift with retirement assets is one way to leave a lasting impact on your community and to ensure that our library will be strong for generations to come.

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The process is easy. Here's how it works.

Request a Beneficiary Designation Form from your retirement plan custodian.
Designate The Friends of the Saint Paul Public Library as beneficiary of all or part of your retirement assets.

That's it!

As beneficiary, The Friends will benefit from the full value of your gift because charities are tax-exempt and can withdraw the assets without paying incoming taxes on your pre-tax funded assets. Your estate will benefit from an estate tax charitable deduction for the gift. You can add or change beneficiaries, including charities, without the expense of a lawyer.

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Withdrawing Funds From Retirement Accounts

Because The Friends is tax-exempt charity, as your beneficiary we can withdraw the assets from the retirement account after your death without having to pay income taxes on the withdrawal. In contrast, any individuals named as beneficiaries of the retirement account must pay income taxes at ordinary rates on any distributions they receive from the retirement account.

The best income tax result is to designate The Friends and other charities to benefit from the retirement account and your loved ones from other assets that will not be subject to income tax when they receive it. They may even receive a stepped-up basis on assets such as real estate and stock. Any amounts left to a charity at death would also receive an estate tax charitable deduction, thus reducing any applicable federal and Minnesota estate taxes.

An example

If you leave a $5,000 IRA to your nephew and a $5,000 bequest, in a will, to The Friends, the total amount actually received by the beneficiaries will be reduced by the amount your nephew is required to pay in income taxes on distribution(s) from the IRA. If instead you switch the assets and leave a $5,000 bequest to your nephew and the $5,000 IRA to The Friends, the income tax related to IRA distributions is eliminated, and the total amount received by your beneficiaries is the full $10,000. The income component, and potential savings, can be especially significant where your non-charitable beneficiary (nephew) is in a high-income tax bracket. There may be state income tax savings as well.

Due to recent changes under the SECURE Act, most IRA beneficiaries (except for spouses) will now need to withdraw all funds from retirement accounts within ten years of the account holder’s death. This change in the law limits the ability of most beneficiaries (other than a spouse, minor child, or disabled or chronically ill individual) to “stretch out” retirement account distributions, limits the ability to continue tax deferral, and requires income tax payment in a much shorter period of time. One more reason to leave retirement assets to charitable organizations!

Let us know!

Please let us know if you have included The Friends in your estate plans. We would like to welcome you into the John & Myrtle Briggs Circle so you receive an invitation to our donor events.

DISCLAIMER: The Friends does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. If you have questions, you should consult your own tax, legal and/or accounting advisors before engaging in any transaction.