April 30, 2021

Investing with Faith / Kimberly Pohovey

Beneficiary designations provide easy way to benefit charity of choice

Kimberly PohoveyHave you thought of leaving a planned gift to a charity near to your heart, only to be overwhelmed by the available options or complexity of giving vehicles? If you are not in a legal or financial role, the world of planned giving can be confusing.

What if I could tell you there is an extremely easy and convenient way for you to leave a lasting gift to a parish, school or ministry that has touched your life or heart? It’s as easy as naming a beneficiary designation.

Beneficiary designations apply to: 1) Individual retirement accounts; 2) Employer-sponsored retirement plans, such as 401(k), 403(b), etc.; and 3) Life insurance policies. Simply put, you can name an archdiocesan parish, school or ministry as the entity that will benefit from any one of these accounts at the time of your death. It is a legally binding directive, and it is as stress-free as contacting the institution that manages your retirement account or life insurance policy and completing their required form stating who you want to benefit. Often, this can be accomplished on your account custodian’s website.

Beneficiary designations may be handled in several ways. You may set up a “primary” as well as a “secondary” or “contingent” beneficiary. The secondary beneficiary is named in the event that your primary beneficiary is no longer living at the time of your death. In this scenario, many donors elect to name a charity as the secondary beneficiary after intending for a family member to be the primary. You can also designate that your asset’s full value be given to the beneficiary of your choosing, or you may designate percentages of the asset’s value to be given to multiple beneficiaries.

Here are some compelling reasons to consider a charitable beneficiary designation:

—It is easy to set up; no out-of-pocket expense; no legal fees.

—Custodian institutions provide the necessary forms, instructions and assistance.

—Beneficiary designations avoid probate court, making for a seamless transfer of the gift.

—Your designations can be revisited as your life and giving goals change.

Perhaps the most compelling reason to consider a charitable beneficiary designation is that gifting retirement assets to a parish, school or ministry occurs tax free. However, if you leave retirement assets to your heirs, they will be taxed.

According to the Stepped-Up Basis tax provision, donors may transfer other appreciated assets to heirs, such as stocks, bonds, mutual funds, businesses, equipment and real estate, and avoid capital gains tax. However, IRAs, 401(k)s, pensions and annuities are not eligible under this provision. Therefore, it may prove more tax-savvy for you to leave other appreciated assets to heirs and retirement accounts to a charitable organization.

In my role at the archdiocese, I am one of a team of development officers whose responsibility it is to walk donors through the planned giving options that best suit their needs, marrying their passions with their giving goals. If you have questions regarding beneficiary designations or other planned giving options, we would be honored to assist you. Contact ccf@archindy.org.

(Kimberly Pohovey is the director of major and planned gifts for the archdiocese. Tax or legal information provided herein is not intended as tax or legal advice. Always consult with your legal, tax or financial advisors before implementing any gift plan.)

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