1. Charitable Giving with Retirement Plans A brief introduction to using retirement plan assets in your planned giving Mike Branch, CFP® Focus Financial 2665 Long Lake Road #270, Roseville, MN 55113 651-379-3935 direct; 651-631-8166 main mpbranch@focusfinancial.com www.mikebranch.net Securities offered through Royal Alliance Associates, Inc. Member FINRA/SIPC

2. Why Leave Retirement Plan Assets to Charity  #1 Reason: to benefit charity Donors must have charitable intent  Tax-efficient use of retirement plan assets Designated beneficiaries pay tax on inherited retirement assets; tax-exempt charities do not  Accomplish other estate planning goals Reduce the taxable estate

3. How to Leave Retirement Assets to Charity  Name charity as sole beneficiary  Charities are listed as only beneficiaries on the beneficiary form  Works well when multiple charities are listed as beneficiaries; each receiving a percentage or dollar amount  Name charity as partial beneficiary  May present tax problems for some beneficiaries  Name a separate IRA to hold assets that will pass to charity by 12/31 of the year after the death of the IRA owner  Pay out benefits to charitable beneficiary by 09/30 of the year after the death of the IRA owner

4. How to Leave Retirement Assets to Charity  Leave a pecuniary bequest  Specific dollar amount goes to charity; remainder to designated beneficiaries  Some custodians may not accept  Same multiple-beneficiary rules apply as above  Post death market fluctuations may complicate gift  Consider separate IRAs for large pecuniary bequests  Make smaller pecuniary gifts via will  Make charitable gift conditional on payment by 09/30  “pay to charity X the sum of $100,000 before September 30 of the year after the year of my death…”

5. How to Leave Retirement Assets to Charity  Leave benefits to charity via a trust May be appropriate when:  Charitable recipient is a charitable foundation that is not created until death of the IRA owner  Amount going to charity is based on a formula  Charitable recipients are determined after death  Formula bequest in beneficiary designation Some IRA custodians may not accept

6. How to Leave Retirement Assets to Charity  Via Disclaimer Charity is named as a contingent beneficiary; primary beneficiary “disclaims” assets that then pass to the contingent beneficiary Allows primary beneficiary to retain control Contingent beneficiary may not be:  CRT in which the disclaimant is an income beneficiary  A private foundation in certain circumstances  Via your estate Estate may receive an income tax deduction on assets given to charity

7. Which Type of Charitable Entity  Public Charity Generally, 501(c)3  Private Foundation  Donor-Advised Fund A public 501(c)3 charity that receives contributions from many donors, invests those funds in separate accounts, and later distributes funds to “real” charities such as museums, churches, other 501(c)3’s, etc. Not obligated to follow the donor’s suggestions

8. Which Type of Charitable Entity  Charitable Remainder Trust (CRT) Trust pays income to one or more non-charitable beneficiaries; at the end of the trust, remaining assets are paid to charity Avoids IRA Required Minimum Distribution rules; however, CRT must pay out at least 5% Decedent’s estate is entitled to an estate tax charitable deduction for the value of the remainder gift

9. Which Type of Charitable Entity  Charitable Remainder Trust – Reasons NOT to leave benefits to a CRT Spousal consent may be required Only the actuarial value of the remainder is allowed as a charitable deduction  CRT may not work well with a non-spouse beneficiary May not work if beneficiaries are too young  To be a valid CRT the value of the remainder must be at least 10% of the total value of the trust

10. Which Type of Charitable Entity  Charitable Lead Trust Usually not suitable CLT is not exempt from tax  Retirement plan benefits would be taxable  Charitable Gift Annuity Has some advantages over CRT:  Income is for life  Income is fixed  No need to draft CRT  May be more appropriate for smaller donations

11. Lifetime Gifts of Retirement Benefits  Lifetime Gifts from Distributions Percent-of-income limit  30%, 50% of AGI Deduction-reduction for high-income taxpayers Alternative Minimum Tax Split-interest gifts only partially deductible  CRT example Penalty for pre-age 59 ½ distributions  10% penalty State income taxes  Some states don’t allow taxpayers to deduct charitable contributions Non-itemizers Deduction decreases taxable income but not AGI

12. Lifetime Gifts of Retirement Benefits  Donate the Required Minimum Distribution (RMD) Appropriate for those who do not need the income Also for those who plan to donate their retirement plan to charity at death  Gift of NUA stock Tax on NUA stock is due when stock is sold Gifting NUA stock to charity avoids tax

13. Lifetime Gifts of Retirement Benefits  Qualified Charitable Distributions (QCD) Made directly from an IRA Does not affect the AGI Donation limited to $100,000/year per IRA owner QCD can be made only from IRA assets Donor must be 70 ½ or older at the time of distribution Available to non-itemizers Not appropriate for Roth IRA QCD must be a contribution that normally would be 100% deductible; therefore, QCD may not be made to:  Donor advised fund, CRT, or other split-interest gifts QCD meets the IRA RMD requirement

14. Putting It All Together  Retirement plans may offer a more tax efficient way for the charitably-inclined to give  Giving with retirement plans may accomplish other estate planning goals  Consider separate IRAs, if IRA beneficiaries include both individuals and charities  Not all charitable entities are suitable for giving with retirement plans  Consider using retirement plans to fund charitable gifts during donor’s lifetime

15. For More Information  “Life and Death Planning for Retirement Benefits”, Chapter 7, Natalie Choate  IRS Publication 526, “Charitable Contributions”  Mike Branch, CFP® Focus Financial 2665 Long Lake Road #270, Roseville, MN 55038 651-379-3935 direct, 651-631-8166 main mpbranch@focusfinancial.com www.mikebranch.net