Beneficiary Designations

Naming Georgetown as the beneficiary of a retirement account, insurance policy, or bank or brokerage account is a tax-smart way to make a gift that leaves a lasting legacy.

The value of retirement accounts may increase significantly over time, leading to a significant built-in tax liability. Leaving these assets to loved ones, other than a spouse, may result in up to 70% of the value being lost to taxes. Instead, if you leave other assets to family, and use a retirement account to make a gift to Georgetown, the funds are transferred tax-free and Georgetown realizes the full value of the gift.

Making Georgetown the beneficiary of a retirement account, insurance policy, or bank or brokerage account is as simple as completing a beneficiary designation form with the account administrator. These gifts are also offer great flexibility as you can easily make changes during your lifetime without incurring legal fees

Joe Hoya names his children as the beneficiaries of his IRA worth $100,000. After the account pays required federal and state income and estate tax, the kids might only receive $30,000.

Alternatively, if Joe names Georgetown as the beneficiary of the IRA, this would leave a larger amount of the estate available for gifts to his children and the estate may receive a charitable deduction. In addition, because Georgetown is a charity, it does not have to pay federal or state income tax on the distribution, meaning the full $100,000 is available to support a school or program important to Joe and his family.

Making a gift to Georgetown using a beneficiary designation is as simple as contacting your account administrator to revise your beneficiary form. You may need to provide the following information:

There are two ways you can create a legacy with Georgetown through your life insurance policy. If you prefer to retain your policy for maximum flexibility, then naming Georgetown as the beneficiary of your life insurance policy allows you to make a tax-smart gift for your estate that leaves a lasting legacy. You can also choose to donate your life insurance policy during your life by naming Georgetown as the irrevocable owner of your paid-up policy. If you would like to discuss your options for naming Georgetown as the irrevocable owner of your paid-up policy, contact the Office of Planned Giving at (800) 347-8067, by email at plannedgiving@georgetown.edu or through our information request form.

If you are still earning income, you can keep making contributions to your IRA. Prior to the SECURE Act, the age cutoff for contributions was 70½. Please be aware that if you are making contributions to your IRA and using your IRA to make QCDs, the contribution amount is excluded from the QCD that can be used for the special RMD offset treatment (don’t worry about this for 2020).

The SECURE Act eliminated the stretch IRA for non-spouses, which means that most IRA beneficiaries are required to take the full account payout within 10 years of the death of the original account holder. Previously, distributions from the IRA could be taken over a beneficiary’s lifetime, allowing a longer time frame over which to pay tax. This is a significant change that will affect estate planning, particularly in situations where you are considering naming children or other family members who are not a spouse as beneficiaries of a retirement account. There may be an even bigger tax incentive to use retirement accounts for gifts to charity and leave assets with a lower tax burden to loved ones.