Gift of Retirement Plan
Gifts of qualified retirement plan assets and IRAs have become increasingly popular. When these assets are owned at death, they can be subject to combined income and estate tax rates of up to 80 percent. A gift to St. Catherine’s of all or a portion of your retirement plan can avoid these taxes, thus enabling you to make a significant gift to the school at a relatively low cost to your estate.
Funds withdrawn from these plans must usually pay income tax, and accounts held by large estates may owe estate tax as well.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.
How to Give Retirement Accounts
To designate part or all of a retirement plan for the school, take these simple steps.
- Contact your plan administrator, by obtaining the name and address from your employer or from your own records.
- 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 the Development Office.
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.
Located in the heart of Richmond, Virginia, St. Catherine’s School is a private, all-girls pre-K, kindergarten, elementary, middle and high school. We provide a well-rounded educational experience for girls from communities across Richmond, Chesterfield, Henrico and all of central Virginia. St.Catherine’s all-girls educational experience is rooted in more than a century of history and tradition. From our revolutionary past to our dynamic present, St. Catherine’s has always focused on preparing students for a boundless future.
