Beneficiary Designations and Retirement
Many friends and members of the Sierra Club are interested in learning more about the ways in which their tax deferred retirement plan assets might be used to benefit the environment. Since there are significant restrictions on how and when transfers and distributions may be made with retirement plans, anyone considering such a gift should review their situation with their retirement plan administrator, tax professional or financial advisor. Contact us.
Retirement plans such as 401(k)s, IRAs or Keough accounts are typically funded by an individual, by his or her employer, or both. Most retirement plans are made up of assets which are not taxed so long as the assets remain within the particular retirement plan - in other words, the plan is generally comprised of untaxed contributions and untaxed earnings. The exception to this is the Roth IRA.
While there are a variety of different types of retirement plans, typically distributions from the plan become taxable at the time when they are paid out to the beneficiary or beneficiaries.
With the exception of one's surviving spouse, the heirs who receive distributions from another person's tax deferred plan could find themselves subject to as many as three different types of taxation:
- income tax
- estate tax
- generation skipping transfer tax
The net result is that the value of the asset can be significantly reduced. However, many retirement plans permit a charity to be named as a beneficiary. Upon the death of the retirement plan participant, the interest passes to charity and is tax free since charities are generally tax-exempt.
- You can avoid taxes on the residue of your retirement account by leaving it to The Sierra Club Foundation.
- You can give the most taxed asset in your estate to The Sierra Club Foundation and leave more favorably taxed property to your heirs.
- You can continue to take withdrawals during your lifetime.
- You can change beneficiaries as your life circumstances change.
- You can designate The Sierra Club Foundation to receive all or part of the residue.
How to Make the Gift
Naming The Sierra Club Foundation as a beneficiary of a tax deferred retirement plan is therefore an excellent way to help protect and restore the environment. It is important to verify that your plan allows this provision. Your plan administrator may require the following information: The Sierra Club Foundation is a "public foundation," incorporated in the State of California on July 13, 1960, and is classified as tax-exempt under Internal Revenue Code 501(c)3. The tax I.D. number for The Foundation is 94-6069890.
Designating The Sierra Club Foundation to receive the remaining balance in your retirement plan is a tax-wise strategy. Simply use your plan's beneficiary form. Please note if you direct an IRA gift through your will or trust it will be included in your taxable estate.
You will need the following information if you decide to designate The Sierra Club Foundation as a beneficiary of your retirement account.
The Sierra Club Foundation
85 Second Street, Suite 750
San Francisco, CA 94105
Tax I.D. Number: 94-6069890
Other Planned Gifts
In addition to the gift option described above, gifts may be made to the Sierra Club or The Sierra Club Foundation in the following forms:
- Life Insurance
- "P.O.D." (payable on death) Accounts and Totten Trusts
- Pension Plans or other Tax Deferred Retirement Assets
If you would like additional information on these types of gifts please contact us.