Guide to Giving

Gifts of Retirement-Plan Benefits

< Gift Plan Types

You may consider using retirement-plan benefits to make a significant gift that will support IU. And because of the estate and income-tax treatment of retirement-plan benefits, the cost of your gift to your estate and heirs is often relatively small.

Retirement-plan benefits include assets held in individual retirement accounts (IRAs) and assets held in accounts under 401(k) plans, profit-sharing plans, Keogh plans, and 403(b) plans.

Income taxes on retirement-plan benefits are deferred but not avoided. That means that, as these assets are withdrawn during retirement by the account owner or the account owner's spouse, they are subject to income tax.

In addition, retirement-plan benefits left to children, grandchildren, and other beneficiaries at the death of the account owner are subject to both income tax and estate tax. This combination of income taxes and estate taxes can result in a tax hit equal to 60% or more of the retirement-plan benefits. Example.

Planning pointer


Please note: Because the federal estate tax has been repealed for 2010, there is no current estate tax in 2010 for the gifts described on this page. However, the consensus opinion among professionals is that Congress will enact an estate-tax law that may be retroactive to January 1, 2010. It is very important that you seek the advice of your estate-planning attorney to determine what changes, if any, need to be made to your existing estate plans, and then again if Congress reinstates the estate tax sometime later this year.
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