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AFA Journal

MONEY & FINANCE

Giving your IRA

Glen Fradenburg
AFA Foundation Director
AFA Journal, September 2001 Edition

Investing in an Individual Retirement Account (IRA) is a wise decision. Many of you established an IRA some time ago and have made contributions to it for years. Others may have retired and rolled the funds from your pension plan into an IRA.

If you've done either, you know an IRA is a great investment tool. With an IRA, you can accumulate and grow assets tax-free. At age 591/2, you can begin making withdrawals from your IRA with no penalty. You can even wait as long as age 701/2 to withdraw funds, but at that time, withdrawals become mandatory. Depending on your contributions and when you established your IRA, you may have a sizable balance.

But if God should call you home before you've taken full distribution of your IRA funds, there is something you should consider. If your will currently names a family member(s) as your IRA beneficiary(ies), they may have to pay both income and estate taxes on the IRA. If your estate is worth more than $675,000, an estate tax will be levied. In addition, since the IRA funds represent untaxed ordinary income, family members could be required to pay income taxes with a partial offset for the previous estate taxes already paid. Combined with the potential need to pay extra state taxes, the result of this combined taxation could be over 80%!

Perhaps it would be wise to bequeath other assets to your family or friends - assets with a more favorable tax treatment. You might then consider leaving your IRA to American Family Association Foundation or some other ministry, since charities are not subject to either income or estate taxes.

As Christians, we should strive to give from our hearts in the most effective manner possible, thereby reaping the satisfaction of knowing we have practiced good stewardship. Let us help you determine if giving your IRA to charity is a good strategy for your family circumstances.

The AFA Foundation can help you create and achieve stewardship goals that honor both God and family. Call us at 800-326-4543, ext. 206.