Americans own trillions of dollars in qualified pension plans, profit sharing plans, 401(k)s, 403(b)s, SEPs and IRAs. Congress never meant for these plans to be passed tax-free to heirs. They are considered “income in respect of decedent or IRD.”

Someone has to pay tax on these assets. By leaving them to someone other than your spouse, your heirs may pay significant taxes on this inheritance. Even if you do not have a taxable estate, the tax rate for your heirs on these assets could be quite substantial.


Consider gifting IRD assets, because charities are tax-exempt and will not pay taxes on retirement assets. Leave heirs assets such as your home or stocks that step up to fair market value when you pass away, leaving little or no tax to pay.


Some use IRD assets to fund a charitable gift annuity that will benefit a family member with lifetime fixed payments. Typically, this type of gift is used by older beneficiaries in exchange for fixed, tax-advantaged payments.

Funding a charitable remainder trust with IRD assets creates a tax-advantaged charitable legacy for your heirs, while lessening their tax burden. The trust will pay income over years, spreading out their tax burden. At the end of the trust, any remaining principal will go to the charity.


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