If you plan a bequest to Fishtown Preservation or any other non-profit, there are substantial benefits to using retirement account funds first for this kind of gift. When an individual—including an heir—withdraws money from a retirement account, he or she must pay income taxes on these funds. However, when a nonprofit receives the account, it can draw out the money tax-free.
If you have an IRA, 401(k), 403(b), or other retirement plan, here is a fifteen-minute guide to designating your plan:
- Get your account number and the name of your plan administrator.
- Go to their website and search for a form usually labeled as “beneficiary designation.” This form enables you to tell the plan administrator how you would like what is left in the plan to be distributed when you are no longer here.
- Download the form or print it out. Fill it out with your name and account number.
- Under the section for beneficiaries, put the names of the people or the nonprofits. There are often blanks where you may indicate percentages, to enable you to give to multiple people and/or groups. (It is simplest, by the way, to use percentages; if you use fixed dollar amounts, you may confuse plan administrators and create administration or tax problems later.)
The Fishtown Preservation Society, Inc.’s federal tax ID number is 38-3621736.
- Review the form, then sign it.
- Fax or email it to the plan administrator.
- Write a note to let us know of your plans. You have now qualified for an invitation to join the Fishtown Forever giving society.
Remember to work with your own legal and financial advisors to make sure your estate is meeting your personal needs and goals. For instance, a common mistake in estate planning is forgetting that the designation of a beneficiary in your plan documents, not your will, will be the one plan administrators use when they make distributions. Make sure you’ve recorded your wishes in the right place.