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By David Vollrath, Executive Director Union County Foundation Many of us have gone a number of years without updating our wills. Worse than that, a fair amount of us don’t even have a will. If you are in either of these categories, immediately upon reading this article, put down the paper, go to the phone and call your attorney’s office to schedule an appointment to write/update your will. In this season of slogans here’s one for you: “It isn’t glamorous, it isn’t fun but a current will most be done.” As you are thinking about your will, here is a question that often is not given due consideration: “Are there cetain assets that would be better for me to leave to charity than others?” From a tax standpoint the answer is yes. Here is the short answer. Any person making charitable bequests via their will should arrange for the charitable bequests to be satisfied with assets of IRD (income in respect of decedent) such as retiement accounts, IRA’s, 401K’s, etc. Wills should be drafted directing charitable bequests to be paid 100% with IRD assets. Other assets (Non IRD) should be used only to the extent that there is insufficient IRD to satisfy the charitable bequests. Why is it important to use IRD assets to satisfy charitable bequests? IRD charitable bequests both reduce the taxable estate by their full value and allow the estate or noncharitable beneficiaries to avoid income taxation on IRD assets. This results in less tax erosion for noncharitable beneficiaries. The net effect of using IRD assets to fufill charitable bequests can be very substantial. It is worth your consideration as you update/write your will. Here’s the big kicker when it comes to using IRD assets for chaitable bequests. Just because you designate IRD assets in your will to satisfy your charitable bequests that is not enugh to make it happen. The IRD beneficiary designation (not the will) controls the final disposition of a person’s IRA, 401K, etc. So if you have called out in your will to use your 401K to fulfill a charitable bequest but your 401K beneficiary designation doesn’t name the charity as a beneficiary then the charity will not be paid out of the 401K. The beneficiary designation of your IRD asset takes precedence. The Union County Foundation encourages you to work closely with your professional advisor(s) as you develop your estate plan and consider your present and future charitable goals. The Union County Foundation is equipped to help you achieve your charitable goals by providing planned giving and estate planning resource information, charitable gift annuities/life income plans, and a broad array of charitable choices including Scholarship Funds and donor advised funds. Please call us at 937-642-9618, email info@unioncountyfoundation.org, reference our website at www.unioncountyfoundation.org, or stop by our Marysville office at 126 N. Main St. We are committed to helping you… “preserve your footprint in time.” |
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