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Gifts of Retirement Plan Assets

Plan to Make the Most of Your Retirement Assets

A Smart Way to Save Taxes and Help Scripps Save Lives

Avoid a Taxing Problem. You know that saving for retirement is a smart move. You've worked hard, thought about your future, and put away money in retirement plans such as Individual Retirement Accounts (IRA), 401k plans, 403b plans, Thrift Savings Accounts, etc. You know you have done the right thing. These retirement plans offer two tax advantages:

1. the ability to contribute pre-tax dollars
2. to benefit from tax-free growth

But did you also know there are smart ways to make the most of your retirement assets to save taxes and to meet your charitable goals?

How retirement accounts are taxed. When you contribute to your retirement account, the money goes in tax-deferred. When distributions are taken from the retirement plan assets (either by the owner or the designated beneficiary after your passing), then federal and state income taxes must be paid on the distributions at the owner/beneficiary's personal income tax rates. After age 70 ½, Required Minimum Distributions (RMD) must be taken on an annual basis by the retirement account owner. The RMD may sometimes push the taxpayer into a higher tax bracket and may have other adverse tax consequences. If the RMD is not taken, then the taxpayer must pay substantial penalties.

What happens to your retirement account after your passing? When you opened your retirement account, you probably completed a "beneficiary designation" form as part of the process. After your passing, the remaining balance in your retirement account is distributed to your "designated beneficiary" by your retirement plan custodian without the requirement of probate or estate administration proceedings, according to the terms of your retirement account contract. You have the right to change your retirement account beneficiary. A change is accomplished by completing a "beneficiary designation form" or "change of beneficiary form" and processing it with the retirement plan custodian/administration. Your retirement account beneficiary designation must be carefully considered and kept up-to-date because of the tax consequences of your choice of beneficiary. If your designated beneficiary predeceases you or you haven't designated a beneficiary, then under some circumstances, distributions must be taken over a period of five years and sometimes probate proceedings are required to collect the account. There are other strict rules which apply to when distributions to designated beneficiaries may be taken or must be made after the death of the IRA owner - all of which have tax consequences.

Designate Scripps Health as a Beneficiary of your Retirement Plan Accounts

To avoid a taxing problem, here are two options to consider:

Option 1 : Beneficiary Designations

Retirement plan assets are easy-to-give assets because you simply complete and process a beneficiary designation form with your retirement plan custodian. With some custodians, you can even complete the beneficiary designation on the company website after you securely sign in to your retirement account.

After you pass away, the "designated beneficiary" completes a claim form and collects the retirement assets or rolls the account over into another tax-deferred retirement account, if available. If the designated beneficiary is the spouse, then the retirement account may be "rolled over" into the spouse's IRA, and the spouse then designates a new beneficiary of the retirement account. The account remains tax-deferred, until the spouse starts taking taxable distributions or passes away.

If you leave these retirement accounts to non-spouse beneficiaries, they must pay income taxes on the distributions from the retirement assets at the beneficiaries' personal income tax rates. If you designate Scripps Health as the beneficiary of your retirement plan assets, the retirement account assets are distributed entirely income tax-free because Scripps Health is a 501(c)(3) qualified tax-exempt charity and 100% of the funds will go to help us save lives. If you want to provide for your loved ones, leave them cash, appreciated stock or other property - your loved ones may benefit from a step-up in tax/cost basis and capital gains taxes may be avoided.

Example of IRA Beneficiary Designation to Charity : The example below shows the tax benefits of giving retirement plan assets to Scripps Health and leaving other non-taxed assets to your loved ones.

Constance has a $100,000 IRA. She would like to support a specific Scripps medical program through her estate. She would also like to leave an inheritance to her brother.
Compare the taxes and the beneficiary's gift:

Scripps as beneficiary: Brother as beneficiary:
  • 100% of the retirement account will be distributed to Scripps - tax-free
  • Scripps will receive the full $100,000
  • He will have to pay an estimated 33.3% percent (24% federal taxes & 9.3% state taxes) or $33,300 in taxes*
  • Brother will receive just $66,700

* Based on the new 2018 single taxpayer brackets. Tax rates could be higher or lower, depending on other taxpayer income and deductions.

Constance could more effectively provide for her brother by leaving non-taxable assets to him (e.g. cash or appreciated stocks, mutual funds or real estate, which assets may receive a "step-up" in tax/cost basis at her death).

It's Easy to Designate Scripps Health as the Beneficiary of your Retirement Plans - Here's How!

__ 1 . Order a Beneficiary Designation Form from your retirement plan custodian.

__ 2 . Complete the form and include Scripps Health as a primary beneficiary of part or all of your retirement plan/account. Your gift will not become effective until after you pass away. You have the right to change your beneficiary during your lifetime and you have full access to and use of your account while you are alive . If you are married or want to benefit others, considering naming Scripps Health as an alternate or contingent beneficiary.

__ 3 . Sign, date and send or deliver the form to your retirement plan custodian for processing. You should receive confirmation that your custodian has accepted your beneficiary form and has processed your changes. If you do not hear from them within 30 days, follow up to confirm receipt of the form and to determine the status.

__ 4. Complete the process on-line. Some retirement plan custodians/administrator allow you to complete your beneficiary designation on-line by securely logging in to your account and changing the beneficiary designation of your account through a link.

Contact your retirement plan custodian to determine the best way to change your beneficiary.

Please let us know so that we may thank you. If you choose to inform us, you may call us at 858-678-7120 , send us an email to giftplanning@scrippshealth.org , send us a personal note, or send us a copy of the completed beneficiary designation form. Your beneficiary designation may be changed at any time. All communications remain confidential and you have a choice as to communications you receive from the Foundation at Scripps Health.

Join our Legacy Society. Don't forget to become a member of our legacy society, Scripps Heritage Circle or Mercy McAuley Heritage Circle (for gifts to Scripps Mercy), so that we may properly thank you and show you the impact that your gift will make on the future of healthcare at Scripps. You may choose to remain anonymous and still receive the benefits of being a member of Scripps Heritage Circle including our annual Heritage Circle luncheon.

Click here to learn more about Scripps Heritage Circle or visit www.scrippsheritage.org/HeritageCircle to join today.

Option 2 : Charitable IRA Rollover Distributions

Age 70 ½ Tax-Free Distributions from IRAs to Scripps Health
100% of Your Gift Will Help Us Save Lives

Use your IRA
Required Minimum
Distribution

to Make a Meaningful
Difference
at Scripps

The Tax-Free IRA Rollovers for Charity law was made permanent in 2015. For those age 70 ½ and older, Charitable IRA Rollover Distributions are tax-free and not included in adjusted gross income. If you are no longer able to itemize your deductions because of the new tax law, this is an easy way to reduce your taxable income.

KEY REQUIREMENTS OF THE LAW:

  • The donor must be at least age 70 ½ on the day of the gift.
  • The IRA is a traditional IRA or Roth IRA (not 401(k) or 403(b) plan or other employer sponsored or non-IRA retirement planning vehicle).
  • Maximum $100,000 donation per donor per tax year , aggregated across all qualified distributions.
  • Outright gifts only - not in exchange for life income gifts such as charitable gift annuities.
  • The recipient organization must be a qualified tax-exempt public charity, such as Scripps Health (no donor advised funds, private foundations, or supporting organizations).
  • The IRA custodian makes the distribution/transfer directly to Scripps Health .
    • Our Tax Identification Number is 95-1684089.
    • Mail to: Scripps Health Foundation
      Attn: Gift Planning
      P.O. Box 2669
      La Jolla, CA 92038-2669
  • The full value of the distribution must be made to charity with no "quid pro quo" or other benefit received by the donor, such as event tickets, services, free parking or other benefits from the charity in exchange for the gift. You may use this type of gift for Scripps President's Council or Mercy 1000 membership, however, you will not receive the free parking card benefit.
  • The IRA dollars transferred would otherwise be includible in gross income if they were not within a qualified charitable distribution.

Click here to request a sample instruction letter or more information about how you can complete a Charitable IRA Rollover Distribution to Scripps Health, or call a Gift Planning Officer today at 858-678-7120.

We're here to help!

Note: No publication or website can explain everything you need to know about retirement plans, gift planning opportunities and which method would be the most advantageous to meet your particular goals. The information on this webpage is educational and is not legal, tax or financial advice. Please consult your qualified professional advisors about the consequences of your retirement planning options as they apply to your personal tax, legal and financial situation.

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