Beneficiary Designations
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In addition to providing you with tax advantages, beneficiary designations are a quick, hassle-free way to support Harvey Mudd College. As with bequests, you have the freedom and flexibility to change your mind and your beneficiaries at any time.
How it works:
- You name HMC as the beneficiary of your IRA, 401(k), or other qualified plan.
- After your lifetime, the residue of your plan passes to HMC tax-free.
Benefits:
- You can escape both income and estate tax levied on the residue left in your retirement account by leaving it to HMC.
- You can give the most-taxed asset in your estate to HMC and leave more favorably taxed property to your heirs.
- You can continue to take withdrawals during your lifetime.
- You can change the beneficiary if your circumstances change.
Planning points:
- You may make HMC a partial beneficiary of your plan and direct the balance to your heirs. At your death, the plan administrator will withdraw our share, providing an immediate gift to HMC and leaving the balance to benefit your family.
- Use your plan's beneficiary designation form to direct your gift to HMC—rather than through your will. If you fail to do so, the assets will be included in your taxable estate.
- Don't use the balance in your retirement account to satisfy a specific dollar-amount bequest already in your will. Your estate will be treated as having received taxable income in the amount of the bequest paid by the retirement plan assets.
Designating HMC as a beneficiary of an insurance policy
You can name HMC as primary beneficiary of your life insurance policy or as contingent beneficiary, should your other beneficiaries not survive you.
After your lifetime, the benefits from your policy would pass to HMC free of federal estate tax. To establish this type of gift, you simply request a "Change in Beneficiary Designation" form from your insurance agent, or make the change to your policy online.
Designating HMC as a beneficiary of your pension plan, 401(k) or IRA
By naming Harvey Mudd College as the beneficiary of your retirement plan, you may save your beneficiaries money in federal taxes on many levels.
First, designating HMC as the beneficiary will remove the value of the retirement assets from your gross taxable estate. Additionally, because contributions to your retirement plan were likely not subject to income taxes at the time of contribution, nor were taxes payable as they appreciated in value over the years, distributions that a beneficiary receives from a retirement plan will be subject to federal income taxes upon receipt.
However, since HMC is a nonprofit and is exempt from taxes, it is not required to remit any portion of the distributions to the Internal Revenue Service.
Frequently asked questions:
Can I use retirement assets to fund a charitable life income arrangement?
Yes, you can. Talk to your financial advisors and us first to project whether your heirs would benefit more from income from a gift plan or withdrawals from your retirement account. A lifetime withdrawal from your plan raises additional tax considerations.
How do I make a gift of my retirement account assets?
Notify your plan administrator of your wish to change the beneficiary. First, get the advice of your plan administrator and an attorney. Call us to ensure that your plans are fulfilled.
