Retirement Assets

Your IRA, 401(k), 403(b), or other Qualified Retirement Plan can provide a tax-smart way to make an impact on The Cape Eleuthera Foundation either now or after the end of your lifetime. The Qualified Charitable Distribution or QCD (sometimes called an “IRA Charitable Rollover”) is a great way to make a tax-free gift now to The Cape Eleuthera Foundation and satisfy your Required Minimum Distribution (RMD) too.

A gift of retirement plan assets could be right for you if:

  • You have an IRA or other Qualified Retirement Plan such as a 401(k) or 403(b).
  • You do not expect to need all of your retirement plan assets during your lifetime.
  • You have other assets, such as securities and real estate, that you want to pass to heirs.
  • You want to provide income or payments to loved ones after you are gone.
  • You would like to make a charitable bequest to The Cape Eleuthera Foundation.

Option 1: Make a tax-free gift now with a Qualified Charitable Distribution (an “IRA Charitable Rollover”).

You can make a tax-free gift with a Qualified Charitable Distribution (QCD) from your IRA. (Other Qualified Retirement Plans such as 401(k)s and 403(b)s are not eligible). You must be at least 70½ years old to take advantage of this opportunity. Your QCD must go directly from your IRA administrator to The Cape Eleuthera Foundation. The total of all of your QCD gifts in any one year cannot exceed $100,000 per person however, your spouse with a separate IRA can also make a QCD of up to $100,000 per year if they otherwise qualify.

The benefits of a QCD gift include:

  • If you don’t itemize your income tax deductions, a QCD provides the tax benefits of an itemized income tax charitable deduction.
  • If you are age 73 and must take a Required Minimum Distribution (RMD), your QCD gift can satisfy your RMD without increasing your income taxes.
  • Your gift provides immediate support for the important work of The Cape Eleuthera Foundation with a tax-free gift.

Option 2: Designate your remaining Qualified Retirement Plan assets as a contribution to The Cape Eleuthera Foundation.

Another attractive option is to designate The Cape Eleuthera Foundation as the recipient of some or all of what’s left in your IRA, 401(k), 403(b), or other Qualified Retirement Plan at the end of your lifetime.

In addition to having the satisfaction of making a significant future gift to The Cape Eleuthera Foundation, your benefits include:

  • Your estate is entitled to an unlimited estate tax charitable deduction for the value of your Qualified Retirement Plan donated to The Cape Eleuthera Foundation.
  • Since The Cape Eleuthera Foundation is tax-exempt, there will be no income taxes paid on the distribution to The Cape Eleuthera Foundation.
  • A tax-smart estate planning strategy is to contribute taxable Qualified Retirement Plan assets to The Cape Eleuthera Foundation and preserve non-retirement plan assets for your heirs.

Note: Directing your Qualified Retirement Plan to charitable and noncharitable beneficiaries can accelerate the income tax. Always consult with your advisors before naming the beneficiaries of your Qualified Retirement Plan.


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IRAs and qualified retirement plans
Retirement plan assets are a major source of wealth for many households. For example, you may have hundreds of thousands of dollars invested in your IRA, 401(k), 403(b), or other qualified retirement plan. These plans do not pay tax on the income they earn, or the capital gain realized within the account. This allows the assets to grow faster than if held and invested these qualified plans.

The primary purpose of your retirement plan is to provide you with income during your retirement, but it can also be an excellent source of funds for making charitable gifts during your life and when your plan ends.

Withdrawals are taxed as income
With the exception of the Roth IRA, the money used to fund a qualified retirement plan, such as a traditional IRA, 401(k), or 403(b), has never been taxed. Also, earnings that occur within a qualified retirement plan are not taxed. As a consequence, withdrawals from any of these plans (except for the Roth IRA) are taxed as ordinary income. Your federal income tax alone on a withdrawal from one of these plans could be as high as 37%.

Withdrawals are required once you reach 73 years old
You must start taking withdrawals from your qualified retirement plan once you reach 73 years old. The amount you must withdraw each year is a percentage of the value of your retirement plan as of the last day of the previous year. The percentage starts below 4% for someone who is taking their first “required minimum distribution” and increases with age according to a schedule published by the IRS. 

Taxes on remaining retirement assets can be very high
Your family members and other heirs will have to pay income tax on any distributions they receive from your retirement plan after you are gone. In addition, your qualified retirement plan is included in your estate, so if your estate is large enough to owe estate tax, your plan may increase the estate taxes you owe. 

Federal income tax alone can be 37%. When you add federal income tax and estate tax together, they can total 62% or more. In states that assess their own taxes on estates, the total taxes on retirement plan assets paid to heirs can be over 62%.

Give retirement plan assets to The Cape Eleuthera Foundation and save taxes
In contrast to your retirement plan assets, your estate will not owe income tax on most of its other assets in addition to estate taxes that may be due. As a result, your estate and heirs will pay lower taxes if you pass your less heavily taxed assets to your heirs, and give your retirement plan assets to charity. Paying lower taxes will mean that more assets will reach your heirs. How much more will depend on the size of your estate, where you live, the other assets you own, and the type of gift you make.

How do I pass retirement plan assets to The Cape Eleuthera Foundation? 
You have several good options for passing your retirement plan assets to us.

Beneficiary Designation 
The simplest and most common way to give retirement plan assets is to make our organization a beneficiary of your retirement plan. All you need to do is to file a revised beneficiary designation form with your retirement plan administrator to designate our organization as a beneficiary of your plan and name the percentage of your remaining assets that you want us to receive. The retirement plan assets that you designate for us will avoid all income tax and estate tax. In order for your estate to enjoy both of these tax benefits, it is especially important that you make our organization the designated beneficiary of these retirement plan assets, not your estate. Please identify us on the form with our legal name: The Cape Eleuthera Foundation, Inc.


Horace Pena, 75, is a retired business executive who has accumulated $500,000 in the retirement plan that he set up through his company years ago. He takes minimum distributions from his plan in order to preserve as much tax-free growth inside the plan as he can. At this rate, he expects that his account may still be worth $500,000 when he dies.

Horace has reached the time in his life when he has begun thinking about the legacies he wants to leave behind after he is gone. He decides to leave a bequest to The Cape Eleuthera Foundation to create an endowed fund that will perpetuate generous support in his name. To accomplish his goals, he designates 40% of the final balance in his retirement account for The Cape Eleuthera Foundation.


  • There will be no income tax or estate tax on the 40% of Horace's retirement plan assets that are transferred to The Cape Eleuthera Foundation.
  • Assume the balance in Horace's IRA when it ends is $500,000 and he donates 40% of that balance ($200,000) to The Cape Eleuthera Foundation. If Horace were to pass the same amount to his family, that distribution would be subject to ordinary income tax. His family would owe income tax of $74,000 (37% bracket) on the IRA assets, leaving only about $126,000 for their own use. If Horace’s estate is subject to estate tax the tax savings would be even greater since his estate would be entitled to an estate tax charitable deduction of $200,000.  
  • Horace has the immediate satisfaction of knowing that he has put a gift plan in place that will keep his name alive and support The Cape Eleuthera Foundation long after he is gone.