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2014 Summer Planned Giving

​​​​​​Q:  What types of property should you consider leaving to charity from your estate?

Patricia Baker (left), CFP®, CTFA Vice President Financial Planning SpecialistKristin Barry, CTFA Trust Administrator Both with BMO Private BankWausau, Wisconsin<br/> Patricia Baker (left), CFP®, CTFA
Vice President
Financial Planning Specialist ​
Kristin Barry, CTFA
Trust Administrator
Both with BMO Private Bank
Wausau, Wisconsin

​A: Although any assets can technically be given to charity in your estate, gifting certain assets to charity may create better overall tax results. Specifically, retirement plan assets, as described in greater detail below, should be considered.

One of the most common methods used to reduce estate tax is through testamentary charitable giving, either by will or trust, which allows the estate to take a charitable deduction.  An estate valued at less than the lifetime exclusion amount will not have estate tax imposed.

With the lifetime exclusion amount being increased to $5,000,000, indexed for inflation, and made permanent (i.e., $5,340,000 in 2014), many estates no longer face estate tax and the complex planning that used to take place. Essentially, married couples have a combined lifetime exclusion amount of $10,680,000.​

Because of this, complexity has given way to simplicity in estate planning. You can actually leave everything to the surviving spouse, who can use a portability technique to shelter an estate of up to $10,680,000. In doing so, the capital assets of the surviving spouse will receive a full step-up to fair market value on the date of death. This means that the heirs can sell the assets of the deceased soon after death and likely not have any capital gains tax to pay.

What does not receive any step- up in basis are ordinary income type assets such as IRAs, 401(k)s, and 403(b)s. These are typically assets that consist of pre-tax contributions and tax deferred earnings, and any withdrawals are taxed at ordinary income rates. This does not include Roth IRAs because those can be withdrawn tax-free.

Heirs to IRAs, 401(k)s and 403(b)s would face a large income tax bite upon cashing anything in. But as long as the family is charitably inclined and plans to leave assets to charity at death, the applicable IRAs and qualified plans are the best assets to choose from because charities are generally exempt from income tax.  

This can be done by directly naming the charity or charities as the designated beneficiaries or naming your estate/revocable trust as beneficiary and then making specific bequests to the charities.  The method of transfer may depend on the overall estate planning considerations you have before you.

For information on designating Marshfield Clinic as a beneficiary of your retirement account, please contact:

Karen Piel, J.D., C.P.A., CFRE
Gift Planning Officer


Have you considered leaving a gift to Marshfield Clinic in your estate? Please contact us to discuss the program or fund you would like to support, and to learn more about the various ways your support can be accomplished. This is also an opportunity to share your wishes as to how you would like to be recognized when your estate gift matures.