A Bequest to Save Taxes
Thomas was a widower who had a great love for Phoenix Theatre. As an individual who had directly benefited from our work, Thomas wanted to thank us with a gift from his estate.
Thomas told his attorney that he wished to leave a bequest to us as part of his estate plan. Thomas's estate included some stocks, real estate and an IRA. Thomas's attorney recommended that he give the appreciated stock and real estate to his children and leave his IRA to charity.
Thomas: My attorney told me that if I gave the stock and real estate to my children, these assets would receive a step up in basis at my death. My children could then sell them without paying tax. However, if I gave my children my IRA, the IRA would be subject to estate and income tax. After paying all of these taxes, very little would be left for my family. By giving the IRA to Phoenix Theatre, I could make a nice gift and avoid any additional tax for my estate and children.Thomas contacted his IRA custodian to obtain a beneficiary designation form. He filled out the form and designated the theatre as the 100% recipient of his IRA account. Thomas's attorney then specified in Thomas's will the bequest of his other assets to his children.
Thomas: I was so impressed with my attorney's advice that I named him executor of my will!Thomas called and notified us of his bequest. He was pleased that because we are a tax exempt institution, we would receive the full amount of the IRA value when he passed away, creating a legacy for the future.