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Is it time to talk with your donors about giving retirement assets to support your mission?

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The Covid era is sometimes referred to as the Great Resignation because of the large number of people who have exited the workforce in the last couple of years. Some are referring to this period as the Great Retirement, considering that, as Goldman Sachs estimated, more than half of the people leaving the workforce are over the age of 55.

While certainly the shrinking workforce can present challenges for the economy, there may be a silver lining for charitable giving. More retirement means more money in motion, from 401(k)s rolling over into IRAs, to retirees being motivated to ensure that their financial and estate plans are in good shape, including the ability to fund charitable priorities.

All of this means it’s a great time to review the various ways your donors can gift retirement assets to your organization, even if you are generally familiar with the techniques. Here’s a quick checklist:  

  • Cashing out. Of course, a donor can always contribute retirement assets (IRAs, 401(k)s and 403(b)s) by simply cashing them out and paying the income tax, and then donating the rest to your charity. Almost certainly, though, in most cases, this is not a good tax strategy whatsoever. 
  • Gifts upon death. When a donor designates your organization as the beneficiary of retirement plans, the donor can potentially reap huge tax rewards in terms of avoiding estate taxes and income taxes attributable to the retirement assets.
  • Lifetime gifts. The Internal Revenue Code contains special provisions for "Qualified Charitable Distributions" that may allow a donor who is over 70 ½ to give up to $100,000 from an IRA directly to your organization and avoid paying income taxes on the distribution.
  • Avoid "gotchas." Remember that some donors may not stay retired. Going back into the workforce presents unique challenges, such as the tax implications of "rehiring" and its impact on Qualified Charitable Distributions.

As always, the team at Akron Community Foundation would be happy to work with you and your donors to facilitate these gifts. Frequently, creating a fund at the community foundation to receive, administer, and distribute non-traditional assets is a great way to help your donors unlock the funds they'd like to give to support your mission, sooner rather than later. 

To learn more, contact John Garofalo, vice president of community investment, at 330-436-5624 or jgarofalo@akroncf.org. We’re always available to answer your questions about philanthropy.

This content is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.

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