World Wildlife Fund

Giving Through Retirement Plans

Millions of Americans have taken advantage of tax incentives provided by Congress to encourage saving for retirement through contributions to Individual Retirement Accounts (IRAs), 401(k)s, and similar plans.


In addition to income tax savings at the time contributions are made to such plans, the assets in the plans then build tax free over time for future enjoyment.

Amounts held in tax-favored retirement plans are typically not subject to income tax until they are actually withdrawn from the plan by the plan owner or surviving heirs.

Making gifts today

You may find that your retirement plan can be a convenient "pocket" from which to make charitable gifts to WWF each year.

If you are over the age of 59½, and can make withdrawals from your traditional IRA or other tax-favored retirement plan without triggering an "early withdrawal" penalty, you may wish to make withdrawals from retirement plans in amounts sufficient to fund all or a portion of your charitable gifts to World Wildlife Fund. Those over the age of 70½ who are required to take mandatory withdrawals from retirement accounts in excess of amounts needed to fund current living expenses may also wish to make their gifts in this way.

Although you will be required to report the income on your tax return, when you itemize your deductions you are allowed a corresponding federal income tax charitable deduction for your cash gifts up to 50% of your adjusted gross income (AGI).

If you are able to deduct the full amount of the gift/withdrawal, this can amount to a "wash" for tax purposes and ensure these funds will, in effect, never be subject to gift, income, or estate taxes. You may also enjoy comparable state tax savings.

You should seek assistance from your accountant or other advisor when determining the optimum amount to give from retirement plan accounts under federal and state tax laws.

Example:

John, age 64, enjoys making charitable gifts in the form of cash each year. This year, after reading about the benefits of gifts using funds from retirement account assets, he decides to make a portion of his gift using amounts withdrawn from his IRA.

Summary of benefits:

• John reports the withdrawal amount on his federal income tax return but enjoys a deduction that in his case fully offsets tax that would otherwise be due.
• His state also does not impose tax on the amount withdrawn.
• The amount donated is removed from his estate and his heirs will inherit other assets that will not be subject to income tax when received.

Watch for special provisions

Legislation is pending in Congress that would renew special opportunities for gifts from traditional and Roth IRA funds for persons over age 70½. Provisions that expired at the end of 2009 allowed for non-taxable gifts to be given directly to qualified charitable interests. Check here or with your tax advisors for the latest information regarding the status of this legislation.

Avoid double taxation

You may also want to consider including charitable gifts to WWF as part of your plans for the future distribution of any balances remaining in your retirement plans at the end of your lifetime.

Because they are included as part of one's estate at death, the assets in tax-favored retirement plans such as an IRA, 401(k), SEP, and others can be subject to any applicable federal (and perhaps state) estate taxes.

Additionally, when heirs receive the balance of retirement plans after payment of any state or federal estate taxes that may be due, income tax will also be due—up to 35% or more—depending on state income taxes and other factors. Thus, the combination of income and estate taxes that could eventually be levied on retirement accounts may, in some cases, amount to a large portion of an account's value.

Rather than allowing retirement assets to be reduced by a combination of estate and income taxes, you can direct that such assets be used to fund charitable gifts to WWF from your estate. This can actually result in more assets being received by loved ones than if retirement assets were left to family and charitable gifts were made from other funds.

Please call WWF gift planning at 1-888-993-9455 or e-mail legacygifts@wwfus.org for more information.