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By Kean Tonetti, Director of Development in Gift Planning
When you are planning your estate, it is important to think about how the estate will affect your beneficiaries. In addition to taking care of your family, giving to charitable or educational organizations such as Rice through your estate can add a new dimension to your legacy, all while providing the benefit of good tax planning. One of the best ways to accomplish these goals is to use beneficiary designations in your estate plan.
Why leave retirement accounts to Rice in my estate plan instead of other assets?
Your retirement plan may not be the best asset to leave your loved ones. If your retirement assets go to family or other important people in your life, then they will have to pay income tax on whatever they receive, at their income tax bracket at the time they receive it. Moreover, if you have a taxable estate, your IRA or 401(k)/403(b) plan will be subject to the estate tax, and a portion of the retirement plan balance may be taxed twice. That is why many tax planners suggest designating charities or educational organizations, like Rice, as your retirement plan beneficiary. This will produce a tax deduction for the estate and prevent your other beneficiaries from paying extra taxes on their inheritance.
Can I leave a portion or all of my retirement account to Rice University?
You have the power to name Rice University as the beneficiary of your IRA or 401(k) or other financial accounts. You can leave all of it, a percentage of it or a specific amount - the choice is yours. In any given year, many loyal donors leave Rice significant gifts by naming the university as a beneficiary of their retirement plans.
Does a gift of my retirement plan assets have to go through probate?
No, retirement assets are held by contract with your retirement plan administrator, so when beneficiaries to a retirement plan receive the assets, the only parties to the transfer of the gift are usually the company holding the financial account and the beneficiaries.
Are there other ways I can use a beneficiary designation to make a charitable gift?
Yes, you can name Rice as a beneficiary on your life insurance policy or a donor-advised fund. You can also designate the cash remaining in your bank or brokerage accounts to charity.
How do I do this?
Contact your IRA, 401(k)/403(b) administrator, your donor-advised fund administrator, your life insurance agent or your banker. If you are setting up your account or life insurance for the first time, you need to fill out the beneficiary designation form and name Rice as a beneficiary. If you have an existing account or policy, ask your retirement plan administrator or insurance agent for a "change of beneficiary designation" form. If you contact our gift planning team, we can provide you with sample language that suits your intended purpose for this great gift. Unlike a will or trust, you do not need to work through an attorney to accomplish this part of your estate plan.
If I designate Rice as the beneficiary of my IRA, 401(k), life insurance or any of these other accounts, how will I know if it is going to make the impact at Rice I want my gift to have?
This is usually accomplished by simply naming Rice University on the financial institution's or insurer's beneficiary designation form and then contacting the Rice gift planning team to discuss the impact you would like your gift to have. We will help you with the documentation you need to express your intended purpose for your gift.
What do I need to do next?
Our gift planning team is happy to answer any questions you may have or discuss the impact you would like your retirement plan or life insurance gift to have on Rice's future. We are happy to help you determine if this type of gift works for you or if there are other options you can present to your financial or legal advisor. To visit with a member of the Rice gift planning team, call us at 713.348.4624 or email [email protected].