Gift of Retirement Assets

A gift of retirement plan assets can provide a tax-efficient way to support the Law School. The University of Virginia Law School Foundation will receive the assets free of income and estate tax allowing 100% of the value of your gift to be applied to the charitable purpose you designate. Donors may (1) name the Law School Foundation as a beneficiary of one’s retirement plan at any age and/or (2) make a Qualified Charitable Distribution from one’s IRA after age 70½.

Beneficiary Designations

Anyone at any age may designate the Law School Foundation as a beneficiary of their retirement plan assets. Amounts distributed to support the Law School will be excluded from income and estate taxes.

How It Works

• You name the Law School Foundation as a beneficiary of your IRA, 401(k), or other qualified plan.
• After your lifetime, the designated portion of your plan passes to the Foundation tax-free.

Benefits

• You can avoid both income and estate tax on the portion of your retirement account that you designate for the Law School Foundation, allowing 100% of the assets to be applied to the charitable purpose you designate.
• You will give your most-taxed estate asset to the Law School Foundation tax-free and leave more favorably taxed property to your heirs.
• You can continue to take withdrawals during your lifetime.
• You can modify your beneficiary at any time if your circumstances change.

How to Name a Beneficiary

• Step 1: To make the Law School Foundation a beneficiary of all or a part of your retirement account, you will need to complete a new beneficiary designation form for your plan administrator. You cannot make the change through your will or living trust.
• Step 2: Notify the Law School Foundation using this DocuSign form. 
• The Law School Foundation's tax ID number is 54-0838566.
• Select a purpose for your gift.

Know the Details

Do not direct the plan to satisfy an existing bequest in your will. The assets will be included in your probate estate and your estate will likely be treated as having taxable income.

An illustration of the different tax and distribution consequences for naming a charitable beneficiary of a retirement account is below, assuming a $2 million estate comprising $1,000,000 in cash and stock, $1,000,000 in an IRA, and a surviving spouse or child taxed at a 30% overall rate.

In the first scenario, the IRA is designated for charity while the cash and stock assets are left to a spouse or child, resulting in $2,000,000 passing to beneficiaries without tax. In the second, the cash and stock are left to charity and the IRA is left to the spouse or child, resulting in income tax of $300,000 and leaving only $1,700,000 to pass to the beneficiaries.

Qualified Charitable Distributions

If you are at least 70½ years old, you are eligible to make a Qualified Charitable Distribution from your IRA of up to $105,000. Donors may also make a one-time-only QCD of up to $53,000 to establish a life income gift. 

How It Works

• If you are at least 70 ½ years old, you are eligible to make Qualified Charitable Distribution gifts of up to a total of $105,000 annually from IRAs to one or more public charities. Distributions will be excluded from federal taxable income and will count toward your required minimum distribution (RMD) if you have one.
• If you are at least 59 ½ years old but not yet 70 ½, you can instead take a taxable distribution from your IRA or qualified plan and make a deductible donation to the Law School Foundation.
• If you are not eligible to use the QCD legislation, a lifetime withdrawal (after the age of 59 ½) from your IRA or qualified plan followed by the charitable donation of the withdrawn amounts is often a "wash" from a tax perspective and will allow you to reduce the value of your account and taxable RMDs in future years.
• Your tax advisor can help you run the numbers to determine whether a donation from your retirement plan is a good plan for you.

Benefits

• If you are subject to an RMD, a QCD can help you satisfy that distribution.
• You decide yearly whether to make a QCD in any amount up to $105,000.
• You can continue to take withdrawals from your IRA in addition to making a QCD.

How to Make Your QCD

• Step 1: Request a QCD from your plan administrator using this downloadable form.
• Step 2: Notify the Law School Foundation using this DocuSign form.
• The Law School Foundation's tax ID number is 54-0838566.
• Select a purpose for your gift.

Know The Details

• You must be at least 70 ½ on the date of the distribution to the charity.
• Distributions must be made from an IRA, including inactive SEP and SIMPLE plans. Distributions from any other type of retirement plan (401(k), 403(b), 457, Keogh, and active SEP and SIMPLE plans) will not qualify.
• QCD distributions are limited to $105,000 in total during each year.
• Your plan administrator must transfer the funds directly--you may not receive the distribution first and transfer it to the charity.
• The distribution must be received by the charity on or before December 31 to count in the current tax year.
• Each distribution will be excluded from federal taxable income.
• Because the QCD distribution is not taxable income, you cannot claim a deduction for federal tax purposes. Some states may treat distributions as income followed by a deduction. Please check with your tax advisor to learn more.
• Note that QCDs typically count toward your required minimum distribution (RMD) if you are required to take one. Using QCDs to make charitable gifts even when you do not have an RMD will help reduce the value of your IRA and taxable RMDs in future years.

For a more complete description of the IRS regulations, please see the most recent version of IRS Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs).

The QCD opportunity can be beneficial in certain circumstances, including when:

• You have an RMD, which will otherwise bump you into a higher income tax marginal bracket, possibly subjecting you to high income-tax penalties.
• You have an RMD and will take the standard deduction--the QCD provides a dollar-for-dollar reduction in taxable income similarly to an itemized deduction.
• You are concerned about the size of future taxable RMDs and want to reduce the value of your IRA account now to reduce future RMDs.
• See instructions to make a QCD.

If you are not eligible to use the QCD law, a withdrawal from your account followed by a charitable donation of retirement plan assets may be a "wash" from a tax perspective – your charitable deduction may offset the ordinary income received from the plan.

As always, your tax advisor can run the numbers for you to determine whether a donation using retirement plan assets is a good plan for you.

For More Information

Email us, or call us at 877-307-0158 (toll free) or (434) 924-4154 (direct) so that we may answer your questions and help you through the process.

The materials provided in this website and the examples contained herein are for illustration purposes only and are not intended as legal or tax advice. We encourage you to consult your own legal and tax advisor.