Beneficiary designations are a popular way of making a legacy gift that will benefit homeless kids in the years to come.
Designating a beneficiary of a financial account is easy to do. In most cases, Beneficiary designations can be created or changed by simply signing a form provided by the account administrator. Often, a beneficiary can be changed online. A beneficiary can be changed again at any time if you change your mind. No lawyer is required. Beneficiary designations also allow assets to pass outside the probate process, which may reduce costs and the potential for contests.
Designating a charity such as Covenant House New Jersey as the beneficiary of all or a portion of one of your financial accounts can represent one of the best sources of charitable giving in your estate.
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Funds from retirement accounts are among the most highly taxed estate assets. For this reason, IRAs, 401(k)s, 403(b)s, Keough Plans, SEP IRAs and other retirement plans make great opportunities for charitable beneficiary designations.
Unlike most other assets, retirement accounts do not receive a ‘basis step up’ on the account appreciation at the time of death. Your heirs will have to pay tax at ordinary income tax rates on distributions they receive from inherited IRAs. Because Covenant House New Jersey is a tax-exempt organization, IRA distributions received by Covenant House New Jersey are not subject to income tax. Designating Covenant House New Jersey as a beneficiary of your IRA or other retirement plans can mean that those funds will be used to establish your legacy of caring for our kids without being reduced by income tax.
Bank accounts, DAFs & mutual fund and brokerage accounts
Many different types of accounts such as bank accounts (either checking or savings), donor-advised funds & mutual fund and brokerage accounts can have ‘payable on death’ or ‘transfer on death’ Beneficiary designations.
Life insurance can also provide an opportunity for a charitable beneficiary designation. After many years, the original need that prompted the purchase of a life insurance policy may have passed, making the policy proceeds an asset that can be used for charitable giving.
Covenant House New Jersey does not provide tax, legal or accounting advice. This material has been prepared for information purposes only, and is not intended to provide, and should not be relied on for tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors for such advice.
Our booklet “Thoughtful Ways to Remember Our Kids” is available to assist you and your advisors in determining what would be best for you. For a copy of this booklet or additional information, please call Wayne Paglieri, WPaglieri@covenanthouse.org | 973-286-3441.
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