Everyone Can Leave a Charitable Legacy

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Jennifer B. Schwarz

Jennifer B. Schwarz

Article reprinted with permission from Cleveland Jewish News.

When you read headlines in the news about multi-million dollar gifts to charities you care about, do you ever think to yourself, “I wish I could do that too?”

While those headline stories are inspiring, they sometimes can leave us with the wrong impression – that only individuals with extraordinary wealth can leave a meaningful legacy charitable gift.

This could not be further from the truth. In fact, you are probably already in possession of a vehicle that can be used to leave a legacy charitable gift to a charity whose mission you care deeply about – without affecting your income during your lifetime.

Naming a charity as the beneficiary of your Individual Retirement Account is an ideal way to leave a legacy charitable gift. It is tax efficient and it can be accomplished simply by changing the beneficiary form.

Why is using your IRA tax efficient? IRA assets may become greatly diminished through taxation when passed down to heirs. Your decedents will owe federal income tax on funds they inherit through your IRA, and sometimes state income tax might also be due. Because an IRA distribution to a charitable beneficiary is not diminished by taxes due to the charity’s tax exempt status, the charity will receive the full value of the distribution. In addition, an IRA distribution to a charitable beneficiary removes the funds from your estate for federal estate tax purposes.

Why is using your IRA a simple way to leave a legacy charitable gift? Designating a charity as a beneficiary of an IRA is as simple as making a change to the beneficiary form for the IRA. The flexibility of amending a form allows you, the donor, many choices. You may decide to leave either a fixed amount or a percentage of the assets to charity. You may also select more than one charity. Designations on the form may be updated as your personal and financial situation changes. Although you should always consult with your advisors, making a change to a beneficiary form typically does not incur additional legal expense.

Should you choose to leave a legacy charitable gift by designating a charity or charities as beneficiaries of your IRA account, not only are you making a tax-advantaged decision, but also you are transmitting a message to your family and community about your values, enabling a beloved charity to better fulfill its mission and inspiring others around you to consider doing the same.

Jennifer B. Schwarz is the Director, Endowment Development & Supporting Foundations, at the Jewish Federation of Cleveland. Contact her at 216-593-2816 or jschwarz@jcfcleve.org.

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