Gifts of Retirement Plans

What Is a Gift of Retirement Plan?

Qualified Retirement Plans may be the most tax-burdened assets you can own. If you die before you have taken all of your distributions from your IRA, 401(k), Keogh, SEP or other qualified plan, the balance remaining in your plan can be subject to multiple taxes that can claim up to 75 percent of its value for those in higher estate-tax brackets.

And while you can roll over your retirement plan at your death to your surviving spouse without incurring any taxes, when your spouse dies, any remaining plan assets can become subject to the same multiple levels of taxation, including Federal and state income tax, federal and state estate tax (partially offset by an income tax deduction) and generation-skipping transfer tax (GST) if the distribution is made to a person such as a grandchild.

This can create a scenario where as little as 25 cents on the dollar remains for your heirs. But you can give your retirement assets to Columbia instead of the government.

Here's how:

• Just fill out a “Change of Beneficiary Form” naming Columbia as the primary beneficiary of your plan. Give other assets to your heirs. Your plan assets will go tax-free to Columbia and your heirs will receive their share of your estate without the burden of extra taxes. If your spouse is living, state law may require that he or she sign a "Spousal Waiver of Benefits."
• Set up a Charitable Remainder Trust in your will into which you transfer any assets remaining in your retirement plan at your death, naming your surviving spouse or children as income beneficiaries for life or a term of years and Columbia as the charitable remainder beneficiary. This approach will avoid all income tax liability and generate a partial estate tax deduction.

N.B.: Consult legal and tax advisors before making any decisions based on this information.

For More Information

If you are considering a gift of a retirement plan, e-mail us, complete the personal illustration form, or call us at 800-338-3294.