Your retirement plan may be an excellent source of funds for gifts to Kenyon. Before you take money out of your pre-tax IRA or 401(k) and pay income tax on the withdrawal, check out a few of our ideas for reducing your tax bite and helping the College.
Giving from a pre-tax IRA or 401(k)/403(b) plan can make a lot of sense. If you withdraw pre-tax funds for your own use, you'll owe income tax on them at your highest marginal tax rate. And if you don't withdraw all of these funds during your lifetime, your beneficiaries will pay income tax when they get the money. So if you're already thinking of making a gift to Kenyon, and you're old enough to begin withdrawing funds without penalty, your retirement plan may be the perfect source of funds.
Gifts during your lifetime. Once you are 59-1/2, you can withdraw pre-tax retirement funds without penalty (but you still must pay income tax on the amount withdrawn). If you donate these funds to Kenyon, you can generally take a tax deduction which will offset the income you received from the withdrawal. And when you reach 70-1/2, things get even better because of the direct IRA rollover. With a direct rollover, you can make direct distributions from IRAs to Kenyon without incurring any federal income tax on the withdrawn amount. Withdrawals up to $100,000 are eligible for the tax-free treatment. These transfers must be made directly to Kenyon as "qualified charitable distributions" or "charitable IRA rollovers." The distributions must be made directly from the IRA trustee to Kenyon to qualify. The direct, tax-free charitable distribution may be used to satisfy some or all of your minimum required distribution for 2013. Learn more about the charitable IRA rollover.
A final gift as part of a smart estate plan. Remember, if you leave pre-tax retirement plan assets to your heirs, they will have to pay income tax and, if applicable, estate tax on the inherited amounts when they receive them. But if you leave these amounts to a tax-exempt organization like Kenyon, no taxes will be due, and the full value of your funds will go to help the College. So when you are thinking about your overall plan, it may make more sense to leave ordinary taxable assets such as a home or funds in a taxable brokerage account to your heirs, while leaving pre-tax retirement plan assets directly to Kenyon by naming Kenyon as a beneficiary of your plan.
How do you do it? Ask the administrator of your plan for a change of beneficiary form and indicate the amount or percentage of the assets you wish to be directed to Kenyon. You can change your beneficiary at any time. The consent of a spouse may be necessary in some instances.
For all questions on giving retirement plan assets to Kenyon, contact:
Kyle W. Henderson ’80
Associate Vice President for College Relations
Gambier, OH 43022