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Retirement Assets

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A gift of retirement plan assets can be a surprisingly easy way to reduce potentially very high taxes and provide support to Carnegie Mellon University.

A gift of retirement plan assets could be right for you if:

  • You have an IRA or qualified retirement plan, such as a 401(k) or 403(b).
  • You do not expect to use all of your retirement plan assets during your lifetime.
  • You have other assets, such as securities and real estate, that you want to pass to heirs.
  • You may want to provide payments to loved ones after you are gone.
  • You would like to make a bequest gift to Carnegie Mellon.

Option 1: Make a tax-free gift with an IRA Qualified Charitable Distribution (QCD) (New as of 12/18/15)

You can make a tax-free gift from your traditional IRA (other qualified retirement plans such as 401(k)s and 403(b)s are not eligible). You must be at least 70 ½ years old to take advantage of this opportunity. You must transfer your gift directly from your IRA administrator to Carnegie Mellon University. The total of all of your rollover gifts in any one year cannot exceed $100,000 per person. A spouse with a separate IRA could also make a rollover gift of up to $100,000 if they otherwise qualify.

The benefits of an IRA Qualified Charitable Distribution (QCD) include:

  1. Satisfies the required minimum distribution but is not included in taxable income
  2. Avoids income tax on IRA withdrawals
  3. Supports the important work of Carnegie Mellon with a tax-free gift

For more information, please download our IRA Qualified Charitable Distribution (QCD) Instructions or contact us.

Option 2: Designate remaining retirement plan assets for Carnegie Mellon University

You designate on your IRA or qualified plan beneficiary designation form the beneficiary of all or a portion of what remains in your retirement plan when the plan ends.

In addition to having the satisfaction of making a significant gift to Carnegie Mellon, your benefits include:

  1. Savings on federal and state taxes that can total 37.0% or more, if your estate exceeds the applicable exemption.
  2. Preservation pf non-retirement plan assets for family.

Option 3: Designate remaining retirement plan assets for a life income plan

You can designate on your IRA or qualified plan beneficiary designation form that the assets remaining when your plan ends be used to fund a gift arrangement that will make payments to family members or other loved ones for the rest of their lives. When the gift arrangement ends, what's left goes to Carnegie Mellon University.

In addition to having the satisfaction of making a significant gift to Carnegie Mellon, your benefits include:

  1. Potentially saving federal and state taxes.
  2. Preserve non-retirement plan assets for family.
  3. Provide payments to family or other loved ones for life.

IRAs and qualified retirement plans

Retirement plan assets are a major source of wealth for many households. For example, you may have hundreds of thousands of dollars invested in your IRA, 401(k), 403(b), or other qualified retirement plan. These plans do not pay tax on the income they earn, allowing their assets to grow faster than they would if you held and invested these assets yourself.

The primary purpose of your retirement plan is to provide you with income during your retirement. However, retirement plans can also be an excellent source of funds for making charitable gifts when your plan ends.

Taxes on remaining retirement assets can be very high
Your family members and other heirs will have to pay income tax on any distributions they receive from your retirement plan after you are gone. In addition, if your estate is large enough to owe federal estate tax, it will also pay estate tax on these assets.

The rate of federal income tax can be as high as 37%. When you add the rates of federal income tax and estate tax together, they can total 62% or more. In states that assess their own taxes on estates or inheritance taxes, the total taxes on retirement plan assets paid to heirs can be over 62%.

Give retirement plan assets to Carnegie Mellon University and save taxes

In contrast to your retirement plan assets, most other assets in your estate will not be subject to income tax and estate tax. As a result, your estate and heirs will pay lower taxes if you pass these other assets to your heirs, and give your retirement plan assets to charity. Paying lower taxes preserves your assets so that they may instead go to your heirs. The amount of your tax savings will depend on the size of your estate, where you live, and the type of gift you make, but your savings will typically be tens of thousands of dollars on a $100,000 gift.

How do I pass retirement plan assets to Carnegie Mellon? 
You have several good options for passing your retirement plan assets to Carnegie Mellon.

The simplest and most common way to give retirement plan assets to CMU is to make Carnegie Mellon a designated beneficiary of your retirement plan. All you need to do is to tell the administrator of your retirement plan to designate CMU as a beneficiary of your plan and the percentage of your remaining assets that you want us to receive. The retirement plan assets that you designate for CMU will avoid all income tax and estate tax. In order for your estate to enjoy both of these tax benefits, you must make Carnegie Mellon the designated beneficiary of these retirement plan assets, not your estate. Please identify Carnegie Mellon on the form as:

Legal name: Carnegie Mellon University

Life income plan
Another option for passing retirement plan assets to Carnegie Mellon is through a life income plan. Passing assets to CMU through a life income plan allows you to provide income to your loved ones after you are gone and then provide support to CMU. Such a plan strikes a balance between leaving all of your retirement plan assets to loved ones while paying maximum taxes and omitting your loved ones by leaving all of these assets to CMU while eliminating taxes on them altogether. Here is how a life income plan works:

  1. Your retirement plan transfers the designated portion of its final balance to the life income plan. 
  2. The heirs you have designated receive payments from the plan each year, typically for life. 
  3. When the life income plan ends, its remaining principal goes to support Carnegie Mellon University.

Using retirement plan assets to fund a life income plan postpones income tax and reduces estate tax on these assets, if your estate is subject to estate taxes. A typical result is to reduce total taxes on your retirement assets by more than half compared to distributing them to your heirs through your estate and incurring a significant tax obligation.

Life income plan options 
There are several life income plan options to choose from. The one that is right for you will depend on a variety of factors. Please contact us if you would like to learn more about funding a life income plan with assets from your retirement plan.


Dan Tran, 75, is a retired business executive who has accumulated $500,000 in the retirement plan that he set up through his company years ago. He takes minimum distributions from his plan in order to preserve as much tax-free growth inside the plan as he can. At this rate, he expects that his account may still be worth $500,000 when he dies.

Dan has reached the time in his life when he has begun thinking about the legacies he wants to leave behind after he is gone. He decides to leave a bequest to Carnegie Mellon University to create an endowed fund that will perpetuate generous support in his name. To accomplish his goals, he designates 40% of the final balance in his retirement account for Carnegie Mellon University.


  • There will be no income tax or estate tax on the $200,000 of Dan's retirement plan assets that are transferred to Carnegie Mellon. If Dan were to pass the same amount to his family and make his charitable gift with stock instead, his family would owe income tax of $74,000 (37% bracket) on the IRA assets, leaving only about $126,000 remaining for their own use.  There would be even greater tax savings if Dan's estate was large enough to pay estate tax. 
  • Dan has the immediate satisfaction of knowing that he has put a gift plan in place that will proudly bear his name and support Carnegie Mellon University long after he is gone.