Because they are subject to income taxes, estate taxes, and excise taxes, retirement plans can be the most heavily taxed asset in an estate. In fact, the total tax bill for heirs can exceed 70% of the plan assets. But there’s good news—legislation in effect through December of 2007 allows individuals to make tax-free distributions of up to $100,000 from their individual retirement accounts (IRAs) to Princeton.
An IRA provision under the Pension Protection Act of 2006 enables tax-fee transfer of IRA assets to 501(c) (3) organizations. It is most appropriate for anyone who is age 70 1/2 and older who is required to take minimum withdrawals but does not need all or part of that income.
"This is the way to give out of assets.”
“It was a simple, straightforward and very efficient way of giving,” says Milton B. Rubin ’57 of a gift made from his IRA. Rubin, who had a successful career in institutional asset management, designated the distribution as a generous 50th Reunion gift earlier this year.
When it came to make that significant gift to crown his perfect Annual Giving record, Rubin says his IRA was the best vehicle for giving. He considered using appreciated stock, but concluded that “the bottom line is that income tax rates are higher than capital gains tax rates. This is the way to give out of assets.”
Rubin used a sample letter provided by the Office of Gift Planning to initiate the transfer from his IR A to the University. (The sample letter is available by download, or by calling [609] 258-6318.) As he notes, to be in compliance with the law, “it’s important that the transfer goes directly from institution to institution.”
"It’s a great—and limited-time—opportunity.”
Robert C. McCartney ’56, the University’s national gift planning chair and a member of Princeton’s Planned Giving Advisory Committee, donated $100,000 through his IRA last year. He allocated $50,000 to Annual Giving ($5,000 over four years and then $30,000 for his 55th Reunion in 2011) and $50,000 to establish the Class of 1956 Research Fund at the Center for the Study of Religion. This will help fund student research in the area of reconciliation and resolution of religious conflict. “Giving from an IRA enabled me to give more than I might have otherwise been able to—and without using appreciated stock,” he says.
His advice to anyone contemplating making an IRA gift? “If you have an IRA that has prospered enough and are paying taxes on distributions that you don’t need, it’s a great—and limited-time—opportunity.”
For guidelines and more information on the provision >
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