Your IRA, 401(k), 403(b), or other Qualified Retirement Plan can provide a tax-smart way to make an impact on Georgetown Visitation either now or after the end of your lifetime. The Qualified Charitable Distribution or QCD (sometimes called an “IRA Charitable Rollover”) is a great way to make a tax-free gift now to Georgetown Visitation and satisfy your Required Minimum Distribution (RMD) too.

A gift of retirement plan assets could be right for you if:

  • You have an IRA or other Qualified Retirement Plan such as a 401(k) or 403(b).
  • You do not expect to need 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 want to provide income or payments to loved ones after you are gone.
  • You would like to make a charitable bequest to Visitation.

Option 1: Make a tax-free gift now with a Qualified Charitable Distribution (an “IRA Charitable Rollover”).

You can make a tax-free gift with a Qualified Charitable Distribution (QCD) from your IRA. (Other Qualified Retirement Plans such as 401(k)s and 403(b)s are not eligible). You must be at least 70½ years old to take advantage of this opportunity. Your QCD must go directly from your IRA administrator to Visitation. The total of all of your QCD gifts for 2024 cannot exceed $105,000 per person however, your spouse with a separate IRA can also make a QCD of up to $105,000 in 2024 if they otherwise qualify.

The benefits of a QCD gift include:

  • If you don’t itemize your income tax deductions, a QCD provides the tax benefits of an itemized income tax charitable deduction.
  •  If you are age 73 and must take a Required Minimum Distribution (RMD), your QCD gift can satisfy your RMD without increasing your income taxes.
  • Your gift provides immediate support for the important work of Visitation with a tax-free gift.

Option 2: Designate your remaining Qualified Retirement Plan assets as a contribution to Georgetown Visitation.

Another attractive option is to designate Visitation as the recipient of some or all of what’s left in your IRA, 401(k), 403(b), or other Qualified Retirement Plan at the end of your lifetime.

In addition to having the satisfaction of making a significant future gift to Visitation, your benefits include:

  • Your estate is entitled to an unlimited estate tax charitable deduction for the value of your Qualified Retirement Plan donated to Visitation.
  • Since Visitation is tax-exempt, there will be no income taxes paid on the distribution to Visitation.
  • A tax-smart estate planning strategy is to contribute taxable Qualified Retirement Plan assets to Visitation and preserve non-retirement plan assets for your heirs.
     

Note: Directing your Qualified Retirement Plan to charitable and noncharitable beneficiaries can accelerate the income tax. Always consult with your advisors before naming the beneficiaries of your Qualified Retirement Plan.

Option 3: Designate your remaining Qualified Retirement Plan assets for a life income plan.

Alternatively, you can designate that at the end of your lifetime some or all of the assets remaining in your IRA, 401(k), 403(b), or other Qualified Retirement Plan be used to fund a charitable remainder trust or charitable gift annuity that will make payments to family members or other loved ones for the rest of their lives. When the life income gift arrangement ends, what is left will go to Visitation.

In addition to having the satisfaction of making a significant future gift to Visitation, your benefits include:

  • A charitable remainder trust or charitable annuity can provide a lifetime of income or payments to your chosen beneficiary.
  • The gift portion of your charitable remainder trust or charitable gift annuity provides an estate tax charitable deduction if your estate is subject to estate taxes.
  • A tax-smart estate planning strategy is to contribute Qualified Retirement Plan assets for a life income gift and preserve non-retirement plan assets for your heirs.

How Your Gift Helps

Your gifts to Georgetown Visitation help to provide a transformative educational experience that cultivates personal strengths and develops a passion for lifelong learning. It will provide Visitation with the resources to…

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provide spiritual grounding, challenging academics, plentiful opportunities, and a supportive and joyous community; enable our students to cultivate their God-given gifts with confidence, enthusiasm, and with friends; guide our students to become self-reliant, intellectually mature, and morally responsible women of faith, vision, and purpose.

 

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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 they earn, or the capital gain realized within the account. This allows the assets to grow faster than if held and invested these qualified plans.

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 73 years old
You must start taking withdrawals from your qualified retirement plan once you reach 73 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 Georgetown Visitation 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, the other assets you own, and the type of gift you make.

How do I pass retirement plan assets to Visitation? 
You have several good options for passing your retirement plan assets to us.

Beneficiary Designation 
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: Georgetown Visitation Preparatory School.

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:

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

Using retirement plan assets to fund a life income plan spreads out income tax and reduces estate tax on these assets, if your estate is subject to estate taxes. A typical result is to reduce total taxes on your retirement assets by more than half compared to distributing them to your heirs through your estate.

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.

Example

Kaitlyn Reid, 75, is a retired business executive who has accumulated $500,000 in the retirement plan that she set up through her company years ago. She takes minimum distributions from her plan in order to preserve as much tax-free growth inside the plan as she can. At this rate, she expects that her account may still be worth $500,000 when she dies.

Kaitlyn has reached the time in her life when she has begun thinking about the legacies she wants to leave behind after she is gone. She decides to leave a bequest to Georgetown Visitation to create an endowed fund that will perpetuate generous support in her name. To accomplish her goals, she designates 40% of the final balance in her retirement account for Georgetown Visitation.

Benefits

  • There will be no income tax or estate tax on the 40% of Kaitlyn's retirement plan assets that are transferred to Visitation.
  • Assume the balance in Kaitlyn's IRA when it ends is $500,000 and he donates 40% of that balance ($200,000) to Visitation. If Kaitlyn were to pass the same amount to her family, that distribution would be subject to ordinary income tax. His family would owe income tax of $74,000 (37% bracket) on the IRA assets, leaving only about $126,000 for their own use. If Kaitlyn’s estate is subject to estate tax the tax savings would be even greater since his estate would be entitled to an estate tax charitable deduction of $200,000.  
  • Kaitlyn has the immediate satisfaction of knowing that she has put a gift plan in place that will keep her name alive and support Georgetown Visitation long after she is gone.