St. Lawrence University: Manley Society

Definition
A gift created through any of a number of government approved, or “qualified” plans that allow individuals to make pre-tax contributions that grow tax-free in the plan. Income is taxed when distributions begin, usually at age 70½.

Retirement-plans include assets held in Individual Retirement Accounts (IRAs) and assets held in accounts under 401(k) plans, profit-sharing plans, Keogh plans, and 403(b) plans. Contributions may be made to these plans with pre-tax income, and the plans grow tax-free. Income is taxed when distributions begin, usually at age 70½. There are penalties to avoid, such as taking distributions before age 59½, or not taking minimum distributions after age 70½, or retirement, whichever comes later.

Retirement plans help conserve wealth for our later years. Unfortunately, many of us forget that these plans are also included in our estate. Because retirement plans are considered “IRD” assets (Income in Respect to a Decedent), the heirs to these plans will pay income tax on the distributions just as you did. If your estate is large enough, the plan may be reduced by estate tax as well. And finally, if the plan passes to a “skip generation” (e.g. grandparent to grandchild) it may be subject to generation skipping transfer tax.

This single, double or even triple taxation makes retirement plans an attractive and tax-advantaged means to plan a gift to charity. Since retirement plan assets that are gifted to charity are not taxed, it is often suggested that other non-retirement, non-IRD assets are left to heirs and retirement plan assets are left to charity, thus saving income and potentially estate and generation skipping taxes in both cases.

Since the rules and procedures vary from plan to plan, it is advisable that the donor work with the plan administrator and his/her estate planning advisors to structure a gift to charity. The plan may allow charity to be a partial, percentage or contingent beneficiary, thus allowing some flexibility to the donor. In some cases a sub-account is established within the plan to “hold” the eventual gift to charity and avoid any unintended complications to other retirement plan heirs.

It may also be possible to plan a gift to fund a charitable remainder trust from your retirement account. In this way an heir would receive income for life or a term of years and then the remainder from the trust would pass to St. Lawrence.

Another option for retirement income in addition to a traditional retirement plan is to create a “ flip-CRUT” or a series of deferred gift annuities. You make annual gifts to the plan, generate an immediate income tax charitable deduction and allow the asset to grow tax-free (trust) or capture a higher payout rate each year (gift annuity). At some predetermined point in the future (like retirement) the plan begins making payments to you. This option is especially attractive if you have reached the limit on the amount you may contribute to a traditional retirement plan.

A planned gift strategy for plan owners who are “forced” to take annual distributions is to use the income to create charitable gift annuities or charitable remainder trusts, thus offsetting some of the income tax due on the distribution and generating income for future years.

A recent alternative for retirement planning is the “Roth” IRA. This option differs from traditional retirement plans in that contributions to the plan are made from after-tax dollars. Thus, the distributions you receive from the plan in future years are tax free income. Roth IRAs are generally not considered a tax-advantaged way to plan gifts to charity.

While every gift situation is unique, there are several steps that may be outlined to help clarify the process.

You decide. Philanthropy is a lifelong process. At some point you may wish to express your thanks to St. Lawrence and help ensure a St. Lawrence education for future Laurentians, and decide that a gift through your retirement plan is a place to begin.
We talk. You may wish to speak with the planned giving office to make sure that your wishes can be accomplished at St. Lawrence, and to create the necessary documentation so that those who come after us can fulfill your intentions.
You talk. You may meet with your plan administrator, and maybe your financial and legal advisors, to discuss your goals and craft your plan to include St. Lawrence.
You sign. You make a final review and sign the appropriate legal documents with your advisor(s), and maybe the planned giving office, creating or modifying your plan.
You relax. You have just connected yourself with the past and the future as you continue the good work of those who came before you, and you prepare the way for those who will come after you. Enjoy the moment!

If you are a new member of the Manley Society, you will receive letters of welcome.
As a Manley Society member, you will receive the society annual report each year, and an invitation to the annual meeting held during reunion each June.
You will be recognized as a member in the university annual Report of Appreciation as a way for us to say “thank you”and encourage others to plan for St. Lawrence as well.