Retirement planning often involves making pivotal decisions about how to distribute your wealth. One consideration that may arise is whether to allocate a portion of your retirement plan to an endowment like those established in the Catholic Community Foundation.
Charitable donations from retirement plans can have significant financial and philanthropic implications. Let’s explore the various factors that can help you determine if these are right for you.
What is an Endowment?
An endowment is a financial asset, established from a donation (or donations) that is invested to grow over time. The principal amount of an endowment is usually kept intact while the investment income is used for specified purposes. An endowment can be established by individuals, families, parishes, or other organizations.
Archdiocesan organizations such as schools, parishes, and Catholic ministries often rely on endowments to fund their activities. In addition, endowments support vocations, clergy, and even cemetery maintenance too.
Contributing to an endowment can be a meaningful way to leave a legacy. In addition to supporting your cause, endowments offer other benefits, some provide income to the fund holders.
Tax Considerations
One of the primary advantages of giving to an endowment from your retirement plan is the potential tax benefit. By donating directly from a retirement account, such as an IRA, you may be able to reduce your taxable income. Particularly for individuals aged 73 or older, Qualified Charitable Distributions (QCDs) allow you to transfer up to $100,000 annually to a qualified charity without the distribution being included in your taxable income.
Required Minimum Distributions (RMDs)
Once you reach the age of 72, you are required to take minimum distributions from your retirement accounts. These RMDs can increase your taxable income significantly. By directing these distributions to an endowment, you can fulfill your RMD requirements while supporting a cause that is important to you, potentially reducing your tax liability in the process.
Creating A Legacy
An endowment gift is a way to create a lasting legacy. Your contribution can provide ongoing support to your chosen institution, creating a ripple effect of positive outcomes for years to come. This can be particularly meaningful for individuals who wish to be remembered for their philanthropic efforts.
Supporting Catholic Causes
Giving to an endowment allows you to support causes and institutions that align with your values. Whether it is furthering Catholic education or supporting a certain ministry, your contribution can make a long-lasting impact. Knowing that your funds will continue to support a cause you care about can provide a deep sense of satisfaction.
Personal Considerations
Before deciding to establish an endowment, it is essential to assess your financial stability. Ensure that you have enough funds to maintain your lifestyle and cover any unexpected expenses. The team at the Catholic Community Foundation can help you understand the long-term implications of your decision and ensure that it aligns with your overall financial plan.
Family & Heirs
Consider the impact of your charitable giving on your family and heirs. It is important to communicate your plans with your loved ones to ensure that they understand and support your decision. Balancing your philanthropic goals with the needs of your family can help prevent potential conflicts and ensure that your legacy is honored.
Getting Started
Whether establishing a new endowment or donating to an existing one, consider a Catholic cause that aligns with your values and goals. There are over 500 existing funds established in the Catholic Community Foundation totaling over $115 million in assets. Perhaps a fund that provides financial assistance to a school or parish that you or your family attended makes the most sense for you, or perhaps it is a particular ministry that assists your neighbors in need, retired Clergy, or new seminarians that inspire you.
Plan Your Strategy
Develop a giving strategy that aligns with your financial plan. Determine the amount and timing of your contributions, taking into consideration the tax implications and your financial needs. The Catholic Community Foundation has many resources to assist you in creating a plan that maximizes the benefits for both you and the endowment.
Leave a Legacy of Love
The Catholic Community Foundation provides long-term financial stability for the causes you and others believe are making a difference in our community. By establishing an endowment fund with the Foundation, you leave a legacy of love that will perpetuate your values and impact many lives for generations to come.
Get started today and learn more about endowments with The Catholic Community Foundation. Visit our FAQs page or call us at 410-547-5461.