Charitable giving is important to you, so you regularly donate to your favorite charities. As you get older and think about the legacy you want to leave behind, you may wonder: In addition to family members, can a charity be
Yes—by naming a charity or organization as a beneficiary on a retirement account, life insurance contract or other asset, you can continue to make a positive impact in your community even after you pass away. As an added bonus, you may be able to leverage tax benefits. Here's how the process works.
Designating a charity as a beneficiary
While you're likely familiar with the ins and outs of
- Retirement accounts, like an individual retirement account (IRA), a 401(k) and a 403(b)
- Life insurance cash value or death benefits
- Bank accounts
- Brokerage accounts
- Real estate
You might name the charity as a direct beneficiary using forms from your insurer or custodian. But you also can create a
You often can combine different beneficiaries, so you might name both your children and charities as partial primary beneficiaries of a trust. You also can
- A percentage of assets
- A specific dollar amount
- Particular assets (like your home)
- Any remaining assets
Real-life examples of naming a charity as a beneficiary
Your donation strategy is unique to you, but it can help to understand what others have done.
Consider Thrivent's client Diane Jaeger. After losing her husband to cancer and receiving an unexpected inheritance from her sister, Jaeger saw an opportunity to help her church with $1 million in donations. Working with her financial advisor, she created a donor-advised fund through
In another example, a couple who partnered with Thrivent Charitable decided to leave their pretax IRA (which any living beneficiaries would otherwise have to pay taxes on) to a donor-advised fund. This fund supports their church and two other charities. The couple's other assets that weren't assigned to the fund go to their children through their will.
Tax benefits of designating a charity as a beneficiary
In some cases, you can get a tax deduction when adding assets to a donor-advised fund. That was the case for Jaeger. She paid premiums on the life insurance contract, and each payment offered a modest deduction.
Can you name an organization as a beneficiary and get a tax deduction? It depends. Simply naming a charity as a beneficiary of your IRA or life insurance might not offer immediate benefits. But giving money to charity could reduce the size of your taxable estate, which may be beneficial.
Naming a charity as a beneficiary also can provide flexibility, as you can still use the assets. If you end up needing extensive medical care, you still may be able to use money in your IRA or other accounts before death.
You also can use creative strategies such as a
Reviewing your plans with tax and legal professionals who are familiar with your situation is critical. You might not qualify for deductions, or you might need to meet specific requirements, and your certified public accountant can help you navigate those waters.
Explore the possibilities of charitable giving
Leaving assets to a cause you value can be fulfilling and make a meaningful impact. One of the easiest ways to do that is to name charitable organizations as beneficiaries. And if you use a donor-advised fund, you can provide guidance that directs distributions even after your death.
You have many options for designing a strategy, and it's important to move forward in a way that's aligned with your values. Consider