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What to Do with Unspent Retirement Savings


Photo: Daryl Marshke, Michigan Photography

Most of us hold retirement savings in IRAs, 401(k)s, 403(b)s, and pensions. If you are like many people, you've held these assets for a long time and have seen them grow. Because of the way these funds are distributed, you likely will not use all of your retirement money during your lifetime. So, the question for many individuals is, "What will I do with my unspent retirement savings?"

It is common practice to designate family members as beneficiaries of your retirement accounts. The problem with doing this is that most of your savings will never go to your loved ones.

Retirement Assets for Life Income

You can make a gift to U-M after your passing and care for your loved ones by creating a testamentary charitable remainder unitrust funded with your retirement assets. You can actually put this plan into motion now by creating the trust and making the trustee the beneficiary of your retirement funds. At your death, the trust will be funded and begin paying income to your loved ones. Your estate will benefit from an estate tax charitable deduction, and you will rest easy knowing that your family and U-M are well cared for. Contact us for more information.

Bequest of Retirement Assets

Perhaps the easiest way to make a gift of your retirement assets through your estate is with a bequest. Your attorney can help you include language in your will or trust directing that a gift be made to the University of Michigan. The benefit is twofold: your estate will receive a charitable deduction to help offset estate taxes, and your gift will enable us to continue our mission in the future. Contact us for more information on how to include U-M in your future plans.

The Problem with Giving Retirement Savings to Family


While most people would like to care for family members after they are gone, the problem with giving your unspent retirement savings to your family (other than your surviving spouse) is that the majority of your savings will be taxed. First, your estate will pay tax on the asset, and then your family members will pay tax at their ordinary income rate, resulting in very little of your remaining money actually going to your family. The better solution is to give your family assets that step-up in basis, such as stock and real estate. Unlike your retirement assets, these assets may be received and sold by your family without paying any tax. If you are looking for ways to save on estate tax, your retirement assets actually make a better gift to U-M. This is because the University of Michigan can receive the entire asset tax-free and make use of it to further our educational mission.

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The University of Michigan has 501(c)(3) non-profit tax exempt status; our federal tax ID number is 38-6006309.

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This site is informational and educational in nature. It is not offering professional tax, legal, or accounting advice.
For specific advice about the effect of any planning concept on your tax or financial situation or with your estate, please consult a qualified professional advisor.