Gifts and Bequests of Retirement Assets

Many individuals hold a significant amount of their wealth in a tax-deferred retirement account, such as an IRA or 401(k). Assets held in these accounts grow tax-free over time but, when distributed, are subject to income tax. Income tax liability occurs when assets are taken out of the retirement account, either by the owner making a withdrawal, or when the account is distributed upon the account owner’s death. Two exceptions are important to note: the income tax liability is deferred if the owner’s spouse is named as the beneficiary of the account, and the income tax liability is eliminated when a tax-exempt charitable organization is named as the beneficiary.

Naming Piedmont Discovery Center as the beneficiary of your retirement account can be advantageous for both estate and income tax purposes. Piedmont Discovery Center, as a tax-exempt organization, does not pay income tax when the assets held in the tax-deferred retirement account are distributed to the Center upon the death of the account owner. If the account owner’s estate is subject to estate tax, the estate receives an estate tax charitable deduction for the value of the account that names Piedmont Discovery Center as the beneficiary. Fulfilling charitable intent and naming PDC as the beneficiary of a tax-deferred retirement account will free up assets that do not have a built-in tax liability for your non-charity beneficiaries.

To gift a retirement account to Piedmont Discovery Center upon death, you must complete a beneficiary designation form with the custodian of your retirement account.

Disclaimer
The information above is not intended to be tax or legal advice. We highly recommend you consult with your estate advisor, attorney, and/or financial planner to ensure the gift you are considering dovetails with your financial goals and life planning.