TWP Canopy - Heal the Planet Beyond your Lifetime with your Retirement Accounts
*August is Make a Will Month and this is the second in a four part series about dedicating your legacy to a healthy climate future through Trees, Water & People (TWP).
Retirement accounts like IRAs, 401(k), and 403(b) accounts offer a great opportunity to plan gifts to TWP both during your lifetime and afterwards. Distributions from traditional IRAs, 401(k) and 403(b) are generally taxable as income. However, when you name a 501(c)3 nonprofit like TWP as one of your beneficiaries, these funds are not subject to any income tax.
Your retirement account administrator can add TWP as a charitable beneficiary of your account, and ensure your tax-free legacy gift upon your death.
Once you reach 73 years of age, the Internal Revenue Service (IRS) will require you to take Required Minimum Distributions (RMDs) from your traditional IRA accounts. These are calculated as a percentage of what you saved over the years, and are taxed as income.
If you don’t need the funds, you can donate your RMD directly to charitable organizations like TWP, satisfying the IRS requirement without recognizing the distribution as income, and avoiding taxes.
Once you reach 70 years of age, you can proactively reduce your IRA balances by making Qualified Charitable Distributions (QCDs), or donations from your IRAs to charitable organizations like TWP. This will reduce your RMD obligations once you reach 73.
Naming Trees, Water & People as a charitable beneficiary of your traditional retirement accounts is another great way to create a legacy gift. Of all assets you have to donate to charity, these three accounts are the most tax-wise to donate, as their entire balance is taxable upon withdrawal.
Assets like real estate (which gets a stepped up basis upon inheritance) or a Roth IRA funded with post-tax dollars may be more beneficial as gifts to your loved ones, as the tax burden is lower.
