Retirement Plans
Retirement plans have become the largest asset in the portfolio of most families, surpassing even the family home. However, retirement plans are not always the best idea for a inheritance for your children. When Individual Retirement Accounts and other plans are left to heirs through your estate, they are subject to multiple layers of taxation which, in turn, reduce the benefits to your family members to as little as 30 cents on the dollar.
If you have a desire to provide a lasting gift to FAIR, this may be the best option.
Tax Benefits
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 That means that, as these assets are withdrawn during retirement by you or your spouse, they are subject to income tax.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 percent or more of the retirement-plan benefits.
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Owners of Individual Retirement Accounts (IRAs) are required by law to take a minimum yearly distribution from their IRAs once they reach age 70 (the amount of the distribution varies according to the value of the IRA and the age of the owner). In many cases, this required distribution will trigger additional federal income taxes. But thanks to the Pension Protection Act of 2006, you can choose to donate all or part of your 2007 required distribution (up to $100,000) directly to FAIR. By doing so, you will avoid increasing your taxable income while making a significant investment in our nation’s future. If you are eligible to take advantage of this extraordinary tax incentive, I hope you will consider directing your IRA administrator to transfer some or all of your required distribution to FAIR. (Forms for effecting the transfer are available from FAIR; contact Marjorie Wilkinson at 202/328-7004 or by e-mail at margie@fairus.org.) |
