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Office of Gift Development

Giving through Retirement Assets

Many Americans have tucked away a substantial sum of money in an IRA, 401(k) or other retirement plan. When donors find they don’t need that money to pay living expenses as they age, they may consider gifting a portion to IU School of Medicine to support medical education or research. Many compelling reasons exist to use these funds to make a charitable gift.

Gifts Made in Life

Traditional IRAs are attractive saving tools because they allow a person to squirrel away money for retirement pre-tax. But that also means the money counts as income—and is taxed accordingly—when you begin withdrawing it. Depending on the amount stashed away, that can have a significant impact on income tax.

For people who are philanthropically inclined, a charitable IRA rollover may be an appealing opportunity to support IU School of Medicine and improve a tax situation at the same time.

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Gift-planning experts in the Office of Gift Development can help donors explore options for establishing a planned gift to benefit IU School of Medicine and are available to work with financial and estate planning advisors to best accomplish giving goals.

Email Tim W. Ueber

The popular provision, made permanent by Congress in late 2015, allows individuals who are at least age 70½ to make a charitable gift of up to $100,000 annually directly from their IRA. Here’s what you need to know about a charitable IRA rollover:

  • The gift counts toward the required minimum distribution.
  • The amount is not included as income, thereby keeping adjusted gross income lower. That’s important for a variety of tax calculations that affect everything from eligibility to take certain deductions to how Social Security income is taxed. Adjusted gross income even factors into Medicare premiums.
  • Donors can give up to $100,000 from an IRA every year, and the gifts can be used to fulfill a multi-year pledge.
  • A charitable IRA rollover cannot establish life-income gifts such as a charitable gift annuity or charitable remainder trust.

Donors who are not yet 70½ can still take a distribution from an IRA and make a gift via check. Income tax will need to be paid on the amount of the withdrawal, but the donation creates a charitable income tax deduction on itemized personal tax returns.

Gifts upon Death

Often, pre-tax accounts—an IRA, a 401(k) and 403(b)—are some of the least desirable assets to leave to your children or other heirs. First, the value of the funds is considered when calculating any applicable estate taxes, which can total as much as 40 percent on high-worth estates that exceed the federal exemption.

But even if an estate isn’t subject to the estate tax, pre-tax retirement accounts can still leave the beneficiary with a hefty income tax burden. Since these accounts allow a person to defer paying income tax on the money contributed, the person who inherits the fund is required to pay taxes on it. Depending on his or her tax bracket, that could mean turning over nearly 40 percent to the federal government—in addition to possibly paying state income tax.

If interested in leaving money to a cause you care about, consider naming a charity as the beneficiary and leaving other, more tax-favored assets to loved ones. Charitable groups aren’t subject to these taxes, so the entire amount of the fund can benefit the organization. Donors retain ownership of the account and may continue to withdraw from it during their lifetime.

To donate an IRA or other pre-tax retirement funds to the IU School of Medicine, simply list “Indiana University Foundation for the benefit of the IU School of Medicine” as the sole or partial beneficiary of the fund.

One Donor’s StoryPlanned Gift Retirement Assets

Gordon Coppoc, DVM/PhD, rarely caught a glimpse of sunlight during working hours. He served as director of IU School of Medicine-West Lafayette  for 17 years, when the program was located in a sub-basement on the campus of Purdue University. For years, he lobbied for more modern facilities to train medical students. In 2014, just before he retired, Coppoc saw his vision realized with the opening of Lyles-Porter Hall.

When plans were in the works, Coppoc and his wife, Harriet, decided they wanted to support the building—and the students who train there—with a philanthropic gift. They took advantage of a law that allowed them to make a gift directly from their IRA without having to pay income tax on the distribution.

“Every time I’m asked where we want our donation to go, I say education,” Coppoc said. “Both of us have been educators our entire careers. We are proud that many former medical students have returned to practice in our community.”

Today, the medical school’s program in West Lafayette occupies two floors in the gleaming new building. One room is especially dear to the Coppocs: A simulation lab where students practice treatment techniques and decision-making skills on a computerized mannequin. It’s a modern amenity they consider integral for medical education.

“It was essential,” Coppoc said. “Simulation is a critical component of training doctors to deliver modern medicine.”

And as a bonus, there are plenty of windows to let the light shine in.