Newspaper article The Christian Science Monitor

Earmarking Retirement Accounts for (Other) Good Causes

Newspaper article The Christian Science Monitor

Earmarking Retirement Accounts for (Other) Good Causes

Article excerpt

There is no way, the old saying goes, to take it with you, but charities, museums, and other nonprofit institutions have developed a growing number of ways to take it from you.

Donors can always give away assets to their favorite institution now, or later through a bequest or trust.

Another popular donation method: gift annuities. These are basically investment accounts created by nonprofits that guarantee donors a specific return during their lives in exchange for a lump- sum donation. The institution keeps the money after they pass on.

But a new tack that has been gaining momentum is contributing all or some of a retirement account, such as a 401(k) or an IRA, to a nonprofit as a bequest.

With this strategy, individuals place a portion of their pre-tax retirement money into a separate account, reducing the amount of taxable income they will have to claim, and over time that money also can grow tax-free.

"More clients are bequeathing their retirement accounts to charities," says Gary Schatsky, an attorney and chairman of the Buffalo Grove, Ill.-based National Association of Personal Financial Advisors. "It makes sense from an estate-planning viewpoint, since the money in a retirement account is otherwise subject to estate and income taxes by a beneficiary."

"And it's a logical place for charities to look for future revenues," he adds.

Indeed, nonprofits are getting savvy about this potential source of funding.

"Retirement accounts make up a great part of peoples' wealth and will do so increasingly in the future," says Judith Hozore, deputy chief development officer for planned giving at New York's Metropolitan Museum of Art. "The problem is that once you take money out of that account, you have to pay a tax on it. It doesn't matter if you use that money to take a cruise or donate to a charity - you still have to pay a tax. …

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