Retirement Accounts

RETIREMENT ACCOUNTS – THE GIFT THAT COSTS THE LEAST

Retirement plans are less valuable in the hands of heirs than they are in the hands of charitable institutions like St. Catherine’s School.  Retirement plans designated for St. Catherine’s School save income and estate taxes. These tax savings will pay for most of the gift. 

Funds withdrawn from these plans must usually pay income tax, and accounts held by large estates may owe estate tax as well. For accounts left to anyone other than a spouse, these combined taxes can easily approach 70%. No other asset is so heavily taxed.

Here is an example: 

Mrs. Jefferson '48, owns at her death a 401(k) worth $600,000. She leaves the retirement plan to her children, and designates appreciated stock, also worth $600,000, to the School. 

Because of her estate’s size, the retirement plan is subject to estate tax at the 40% rate. 
Add the income tax, and her retirement plan could undergo taxation of up to 70%, as follows: 

      $600,000 Retirement Plan total balance 
    - $240,000 Estate tax at 40% of total balance
    =$360,000 
    - $188,000 Income tax at 30% of $360,000
    =$252,000 Remaining in the account for Mrs. Jefferson's children after combined taxation 

Less than half of Mrs. Jefferson’s retirement plan ends up with her children, where she wanted it to go. 

Instead, a better result for everyone: 

In lieu of leaving the 401(k) plan to her children, Mrs. Jefferson designates the retirement plan balance to the School. As a charitable contribution, the retirement plan escapes both income and estate taxation. This arrangement also benefits her children, who inherit the $600,000 stock portfolio on these favorable terms: 
  • free of taxation on any capital gains in the stock at their mother’s death, since the basis in the stock is “stepped up” to its fair market value at the date of her death, and
  •  protected from any federal estate tax by the currently applicable estate tax credit.
This website presents general information only and should not construed as legal financial, accounting, or other professional advice. Please seek professional assistance to determine how any giving approach discussed here might impact your situation.

How to Give Retirement Accounts

To designate part or all of a retirement plan for the school, take these simple steps. 

1. Contact your plan administrator, by obtaining the name and address from your employer or from your own records. 

2. On the beneficiary designation form, list The St. Catherine's School Foundation for whatever share of the balance you desire. 

Please note your designation in your own records, and inform Deborah A. Dunlap '70, Director of Development, 804-281-7141 or email ddunlap@st.catherines.org, and she will gratefully enroll you in The Arcade Society, the school’s way of honoring those who include the school in their long range planning. While St. Catherine’s would like to list your name in its publications among the members of the Society, it will keep any details of your plans for the school secure and confidential. 


6001 Grove Avenue | Richmond, Virginia 23226 | (p) 804.288.2804 |  (f) 804.285.8169
Experts in the way girls learn best, St. Catherine’s offers a rigorous liberal arts education, Mandarin Chinese and Spanish (JK- grade 12), JK- grade 12 STEM (Science, Technology, Engineering, Mathematics) and 23 AP classes and 33 honors classes. Call us today for a tour 804-288-2804.