Smart Tax Strategies for Leaving Retirement Plans to Your Heirs

Do you have a retirement account? Smart move! Many people wisely take advantage of tax incentives to contribute to IRAs, 401(k)s, and similar plans. These funds are often an individual’s largest asset. If you, too, are the owner of a large retirement plan, you need to know that there are significant tax advantages to making charitable gifts with retirement plan assets. 

When you die, the IRS regards any remaining balance left in your retirement account to be untaxed income. That means if you bequeath that balance to your heirs, the IRS will subject it to both income and estate tax. This potential double taxation can consume as much as 60% of the value of your account for very large estates. However, even if your estate is not large, there are still significant tax advantages to making charitable gifts with retirement plan assets. 

You have options to reduce this potential tax hit without depriving your loved ones.  You can create a meaningful legacy at Silver Cross by naming the Silver Cross Foundation as the beneficiary of your retirement plan – and then use other tax-advantaged assets to make gifts to children, family, and friends. As a nonprofit organization, Silver Cross won’t pay income tax on the distribution (nor will the plan balance be included in your taxable estate). Your heirs will receive more of your estate because the tax-advantaged assets you leave to them will not be subject to income or estate taxes. 

For example, assume you have a retirement plan valued at $10,000, and a bank savings account also valued at $10,000. You want to leave $10,000 to the Silver Cross Foundation. Whether you leave Silver Cross the retirement plan or the savings account makes no difference.  Silver Cross is able to keep the full $10,000 either way, since no income tax applies to the receipt of a retirement plan or a savings account by the Foundation. 

For more information or if you have already included Silver Cross in your estate plans, please contact Tracy Simons, Executive Director of the Silver Cross Foundation, at tsimons@silvercross.org or by calling (815) 300-7113.  Thank you for ensuring safe, quality healthcare for years to come for our patients and the community.