Use Your IRA As A Tool For Good

Brooklyn Org is here to help you make the most of your giving with the resources you have at hand – and one tool you may not have considered is your IRA, which can be a powerful tool to benefit the causes you care most about.

Over 42% of Americans own an IRA, and in many cases, IRAs–especially for people who have rolled over one or more employer retirement plans–represent a significant portion of a household’s net worth. Your IRA may even offer some of the best opportunities to support your charitable giving.

IRA Beneficiary Designation

For starters, no matter what your age, consider the benefits of changing the beneficiary designation on your IRA to name your fund at Brooklyn Org as the recipient of all or a portion of the account. This is an easy, tax-efficient way to leave a bequest to support the causes you care about, and Brooklyn Org’s Donor Services team can help you structure the terms of your fund to serve your personal giving goals.

One of the most effective ways to leave a charitable gift is through an IRA beneficiary designation due to its tax benefits. When you designate Brooklyn Org as the beneficiary of your IRA, the funds transferred after your death are not subject to estate tax. Additionally, as a public charity, BKO does not pay income tax on these IRA assets. In contrast, if you name your children as IRA beneficiaries, those funds will be taxed as income for them and also be counted toward your estate, which could lead to significant estate and income tax burdens. Instead, you could set up a fund at Brooklyn Org  and make arrangements for your children to serve as advisors on the fund, allowing them to continue your family’s charitable legacy without tax burdens.

Exploring ways to give your IRA to charity can also serve as a helpful reminder to review all of your beneficiary designations. They may not seem urgent, but those beneficiary designation forms are critical to estate planning. Picture this: a man passes away, leaving behind a sizeable retirement plan. Back in the 1980s, he named his then-girlfriend as the beneficiary of his retirement plan. Even though their relationship ended decades before his death, he never updated his beneficiary designation. By the time he passed away, the plan had grown to nearly $1 million—and it all went to his ex-girlfriend from decades before.

This cautionary tale isn’t an urban legend that accountants share around the office for Halloween – it really happened to a former Procter & Gamble employee who passed away in 2015! Although this is a particularly unusual example, it serves as an important reminder to keep your beneficiary designations up to date.

Qualified Charitable Distributions

Finally, if you have reached the age of 70 ½, you can make what’s known as a Qualified Charitable Distribution (“QCD”) from your IRA directly to certain charities, including a designated fund or a field-of-interest fund at Brooklyn Org–up to $105,000 per year per spouse. You won’t pay income tax on the distribution, and if you’ve reached the age for Required Minimum Distributions, your QCDs count toward them.

Here’s the bottom line: When you’re reviewing your financial and estate plan with your advisor, don’t overlook your IRAs. If you intend to leave a charitable legacy, or if you’d like to support your favorite organizations during your retirement years, your IRA could be one of the most powerful tools to make a lasting impact on the causes that matter most to you.