Patricia spoke with a friend who recently set up a charitable gift annuity with her favorite charity. Patricia called her alma mater and learned that she would receive a good payout based on her age and that she would receive a charitable income tax deduction and part of the payment from the annuity would be tax free.
Your retirement plan is probably among your most valuable assets. While the retirement asset is a great asset for you, it may not be the best asset to leave to children. If you have a taxable estate, your IRA or 401(k) plan will be subject to the estate tax, and any distributions to children will also be subject to income tax. That is why many tax planners suggest leaving retirement plans to charity. This gift will produce an estate tax deduction, and the charity will not have to pay the income tax on the gift.