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Gifts Using IRA or Qualified Retirement Assets

For anyone thinking about making a bequest to Carleton through a will or revocable trust, it is worth considering whether that bequest could be made by designating Carleton as a beneficiary of an Individual Retirement Account or qualified pension plan. Why? The tax burden on retirement assets at the time of a plan participants death can be truly substantial. The combination of income taxes and estate taxes can eat up a significant portion of an individuals qualified pension plan assets. Because of this potential double taxation, a charitable gift using retirement assets at death can be an attractive strategy.

Designate Carleton as a Beneficiary

A simple, tax-wise way to make a bequest to Carleton is to name the College as a beneficiary of your IRA or qualified retirement plan. By designating Carleton, a tax-exempt organization, as a beneficiary, the plan assets ear-marked for the College will not be subject to estate or income taxes upon your death. This strategy saves other assets (outside of your retirement plans) for your family. And the result is a very tax-efficient way to make meaningful gifts to your family and your alma mater.

This plan is easy to accomplish. Just advise your IRA custodian or plan administrator of your wish and sign the required form. If you are married, you will need to check the procedure for coordinating your charitable gift intentions with your spouse’s benefits. This strategy has become even easier under new regulations adopted by the IRS.


Susan Black, a member of Carleton’s Class of 1954, was the primary beneficiary of her late husband’s IRA. Upon his death, she decided to roll her husband’s IRA into her own qualified account. Susan’s total estate is currently worth approximately $2 million, consisting of $500,000 in her IRA plus appreciated securities, cash investments, a home, and personal property.

In honor of Susan’s upcoming fiftieth reunion, she would like to leave $500,000 to Carleton with the balance of her estate to go to her children. A charitable bequest to Carleton of any asset in Susan’s portfolio will be deducted from her estate at the time of her death. Which asset she decides to designate for her gift to Carleton, however, can make a sizable difference in the amount left in her estate for her children.

If Susan leaves her IRA to her children, they will incur almost $102,000 in additional income tax on this portion of her bequest to them. If, instead, she leaves the IRA to Carleton, there is no income tax liability and her children get to keep the $102,000 that would have otherwise been owed as income tax on the IRA.