Much of Iowans’ wealth can be found in retirement benefit accounts, like IRAs, 401(k)s, 403(b)s, and so on. Funds from retirement benefit plans can be easy and tax-savvy ways for you to support your favorite causes and organizations!
IRA Charitable Rollover
The Individual Retirement Account (IRA) charitable rollover allows individuals aged 70.5 years of age and older to donate up to $100,000 from their IRAs directly to charities, without having to count the distributions as taxable income. This gift transfer is called a qualified charitable distribution (QCD).
To be clear, there are two threshold requirements to take advantage of the IRA charitable rollover. The first is that to be eligible you must be 70.5 years of age or older. An important nuance to note is the required annual distribution is based on the year the participant reaches age 70.5, not the day they reach that age.
The second threshold requirement is the IRA charitable rollover applies to IRAs only. Under the law, charitable gifts can only be made from traditional IRAs or Roth IRAs. The IRA charitable rollover does not apply to 403(b) plans, 401(k) plans, pension plans, and other retirement benefit plans.
What about younger donors, or people who have different, unique, kind of retirement benefit plans? There are at least a couple of good alternatives to consider.
Required Minimum Distributions
Generally, an account holder must start taking Required Minimum Distributions (RMDs) after age 70½. And, sometimes, much younger folks must take RMDs when they inherit a retirement benefit account. If you’re already having to take RMDs, why not use those funds to support your favorite charity?
There is a (pretty severe) tax penalty if you withdraw funds from a retirement benefit plan too early. But, generally speaking, individuals over 59½ years of age may withdraw funds from retirement plans without any penalty. So, in such cases, a donor can withdraw funds, make a gift with these funds, and then claim an offsetting federal income tax charitable deduction. Keeping in mind that every donor’s situation is unique, in the clear majority of such cases, a charitable gift made in this manner would at the least be tax neutral for the donor.
No matter what age, no matter what type of retirement benefit plan, there is a very easy way for you to help your favorite charity. Simply name the charity as the beneficiary!
It’s been my experience that many folks don’t consider or realize they can make a meaningful gift by naming a nonprofit as the beneficiary of IRA, 401(k), 403(b), or another plan. This is simple and does not require drafting a will or testamentary trust. (It is true that if the account holder is married, the spouse should be informed and may have to consent to gift).
Keep Beneficiary Designations Current
This is a good time for a reminder to check your beneficiary designations not only on your retirement benefit plan but on ALL such accounts or funds. Savings accounts, checking accounts, mutual funds, stock portfolios, annuity contracts—all these have beneficiary designations (also sometimes called “payable on death” or “transfer on death”). Are your beneficiary designations current? Or is there an ex-spouse still named as a beneficiary on your IRA? Make sure to keep your beneficiary designations current, and while doing so, consider naming our favorite nonprofits as beneficiary. Your gift could make a tremendous difference.
Of course, there’s always much more to be discussed when it comes to charitable giving. I would love to hear your ideas and charitable giving goals. Don’t hesitate to contact me by phone at 515-371-6077, or email, Gordon@gordonfischerlawfirm.com.
I’ve previously written about the six “must have” documents of everyone’s estate plan. These documents include some key people that are essential. But, the terms for some of these roles can be confusing. Let’s review the main ones today.
Who/What is a Beneficiary?
Let’s talk first about beneficiaries. This is a basic term you’ve probably heard before or seen while filling out documents. Your beneficiary is the person to whom you leave your belongings, assets, money, land, etc. Of course you can leave your stuff to more than one person, in which case there would be multiple beneficiaries. With multiple beneficiaries, you’ll have to clearly designate who gets what. This can be done in a number of ways; for example, percentages of total value of the estate, or it can be done with specifics.
An example of percentages: “I want Beth to inherit 20% of my estate.”
An example of a specific bequest: “I want my son John to inherit the country house and I want my daughter Suzie Q to inherit the lake house.”
You don’t have to be related to your beneficiaries, and you’re under no obligation to leave anything to family members whom you wish not to receive your assets (no matter how hard that may be or how guilty you might feel). You could elect to leave part or your entire estate to charities. It truly is your choice as to who should benefit under your estate plan.
There’s a lot more to say about beneficiaries, but for now, just remember to make sure all documents are up-to-date. Keeping your estate plan up-to-date ensures you avoid nightmares like your ex-husband from years ago cashing in on your retirement funds.
How about an Executor?
Let’s talk about the executor of the will. An executor is the person who is in charge of your estate plan. They make sure the will is carried out as it is written. It’s not an awful job, but it is an awful lot of responsibility. Most folks, having never had to deal with the execution of a will, might not know how arduous it can actually be. Additionally, your executor might be close to you and grieving your passing while trying to make sure everything is taken care of properly. It can be stressful, to say the least.
When picking an executor, you want to make sure it’s someone you trust. Obvious, right? But, it’s so much more than that. We all have people in our lives we love and trust on a personal level, but we know they’re not responsible with things like finances and details. Those people would not a good executor choice, generally speaking. Look for someone in your life who is detail-oriented and can handle the part-time job of dispensing an estate.
If there’s no such person in your life, or even if there is and you simply don’t want to burden them with the task, there’s another great option: corporate executors or trustees–which can be found at a bank or a credit union. The corporate executor offers the bonus of being completely neutral in all things, which can be helpful if you have sticky family dynamics that might make life difficult for the executor. The corporate executor does come at a cost, which is usually based on the size of the estate. I tend to think you get what you pay for, and this could be an excellent option to consider.
If you do go with an executor you know personally, you’ll want to sit down and talk with them about it. You want them to know that you’ve assigned them the task and why you chose them specifically. And, if you’re choosing one child out of many, you’ll want everyone to be on the same page so there’s no unexpected turbulence after you’re gone.
How about Legal Guardians?
Legal guardians are the folks who will take care of your minor children should something happen to you before they reach the age of 18. Like your executor, this job requires a lot of trust in the person you choose.
Clearly, this is not a job that ends after the estate is closed. Who you decide to choose should be a matter of closeness of relationship (as in bond, not necessarily family ties), mutual values, and ability to handle the responsibility. Have an in-depth conversation with the person or people you choose. You want to confirm that you’re comfortable with their parenting style, make sure they feel they’re up to the job, and let them know why you chose them.
Important Trait in Common: Trust
What’s the key theme in all of these roles from beneficiaries to executors to legal guardians? Trust. The level of trust you have in the people who are involved in and benefit from your estate plan should be strong to be successful. If you ever have any questions about selecting the key players in your estate plan, don’t hesitate to reach out.
Your Estate Plan Should be Unique to You
There it is in a nutshell. Those are the basics of the key people in your estate plan.
Whether your estate plan is simple or complicated, it does require some thought and time, but it’s worth the investment. A proper estate plan can save you and your estate costs, taxes, and fees; help your family and friends; and provide you peace of mind.
Perhaps most importantly, through proper estate planning, you can help your favorite charities in ways large and small.
No Day Like Today
Why not start right now with my Estate Planning Questionnaire? It’s provided to you free, without any obligation.
An employee handbook is just an employee handbook…or so you may think. But, what happens when it doesn’t have an appropriate “disclaimer?”
Incorporate a Disclaimer
In addition to smart employment policies, all nonprofit entities should develop an employee handbook as a part of the onboarding/training process for all employees. The handbook, like other employment policies, serve the purpose of capturing the values you wish to instill in your workforce, outline the standards of behavior you expect, and provide a clear guide for rights and responsibilities.
That said, an employee handbook can actually be considered an employment contract if you’re not careful. And, to best set out the parameters of the employment relationship, it’s best if the handbook and contract are two different documents.
If you think about it, an employee handbook has all the elements of a contract—it’s written, it’s specific, it “promises” certain things will (or won’t) happen. It’s even “signed” by the nonprofit/company.
An employee handbook could actually be considered a unilateral employment contract unless the employer includes an appropriate disclaimer, with wording like this:
“The policies, procedures and standard practices described in this manual are not conditions of employment. This manual does not create an express or implied contract between the Nonprofit/Company and employees. Nonprofit/Company reserves the right to terminate any employee, at any time, with or without notice or procedure, for any reason deemed by the Nonprofit/Company to be in the best interests of the Nonprofit/Company.”
Free Employee Handbook Sample
To make all of this more salient, I’ve compiled a free Employee Handbook guide that you can use as a sample guide to better understand how a handbook and a contract or agreement differ.
There are many reasons why an employee handbook should be just that and not also serve as an employment contract. I would be happy to review the employment documents you currently have in place or outline what documents your nonprofit needs, to ensure you have the best possible foundation for legal compliance. Shoot me an email (email@example.com) or give me a call (515-371-6077) and we’ll get your free (no-obligation) one-hour consultation scheduled.