Retirement plans grow tax-free, meaning that the growth or earnings are not taxed annually but can continue to accrue. The earnings are taxed when they are withdrawn. Additional savings can occur if the recipient is in a lower tax bracket when the funds are withdrawn (for example, during retirement) than when the investments were growing.

Norman and Ruth had often put some of their savings into the stock market. They were also employed by companies that had 401k plans. They kept investing and the value of their plans kept growing. They had long been active in charitable giving.

Norman: "Our first experience was giving shares of a stock that had more than doubled in value. We needed some help that year with our tax situation and that gift was a great idea. Also, our tax-sheltered retirement plans kept growing and just recently we rolled them into our IRA."

Ruth: "But taxes will eat up so much of it. Not that we need it all, but we were hoping to get more value out of it."

Norman: "We recently sat down with our attorney to look at our overall financial plans to make sure we had set up our affairs to best suit our needs. Our attorney suggested we consider making a charity a partial contingent beneficiary, knowing how much we would like to help others."

Ruth: "Tax benefits for our estate, protecting our future, and knowing we're making a difference in other peoples' lives - it feels good!"

Careful planning must be done regarding the withdrawals from retirement funds. Not only is there a potential income tax burden, but if there is a balance in your retirement account at your death, there may be estate taxes as well. Estimates are that taxes could eat up as much as 70-75% of retirement assets under certain circumstances.

Qualified retirement plan funds are an excellent choice for bequests. By designating Millikin University as a beneficiary (or as a contingent beneficiary after the death of a spouse), funds pass to Millikin free of taxes. It is possible to specify that a charity will receive all remaining funds in the account, or to establish a percentage to fund the bequest.

Please note - the designation of any charity as a beneficiary of retirement fund assets cannot be written in your will or trust. The charity must be designated as a beneficiary of the retirement plan.

There are other strategies in using retirement fund assets to fund charitable gifts. For example, qualified retirement fund assets may be placed in a charitable remainder trust to provide for children or a spouse. There may be estate tax savings as a result.

Everyone's personal circumstances are different, so please consult your tax advisor concerning the use of qualified retirement funds. We are happy to make suggestions that could be effective in fulfilling the needs of you and your family while benefiting Millikin University as well.