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If the largest asset in your estate is your Retirement Plan - your 401(k), IRA, Keogh or other such accounts - you may be surprised to learn that the IRS will impose income tax on any balance that you direct to a non-spouse beneficiary. This tax is in addition to the estate tax that will be imposed on the account. For estates fully subject to the estate tax, the result can be that 70 percent of the value of your retirement plan will be consumed in taxes before your child, relative or friend who receives it. There is a sensible charitable alternative: name Home of Hope as the beneficiary of your retirement plan, then use other assets not subject to income tax to make gifts to your heirs. We won’t pay income tax on our distribution and your heirs will receive their share of your estate without the burden of extra taxes. You can turn surplus life insurance coverage into a charitable gift to Home of Hope, or use a new policy to create an endowment from income instead of capital. (Note: the tax effects of I.R.C. §’a72042 do require you live at least three (3) years after the gift to avoid the inclusion of the death benefits in the donor’s gross estate.)
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