Dear Neighbor

Beneficiary Designation of Retirement Plans and Annuities

What is it?

Retirement plans, tax sheltered annuities, or other arrangements allow people to save money for use later in life. Many people today have large qualified retirement plans such as 401(k) plans and Keogh plans, tax sheltered annuities, or other tax deferred arrangements such as Individual Retirement Accounts (IRAs).

How does it work?

Retirement plans allow for the tax deferred growth of funds, and in most cases tax deductible contributions to the plan initially, to create a financial base to provide for you in your retirement years. Payments generally are required to be made from the plan to you upon reaching a specific age. If you die before the funds are exhausted, the remaining accumulated assets in the account go to your named beneficiaries. You can make a significant contribution to Dear Neighbor Ministries by making us one of the beneficiaries of your retirement account.

What are my benefits?

Due to the income tax deferred nature of retirement plans, these assets are generally taxable as income to the recipients (called “income in respect of a decedent” or “IRD”). If you plan to make a gift to charity upon your death, it is best to leave retirement assets with IRD to the charity. Unlike other recipients such as children or other loved ones, the charity will not have to pay income tax on the retirement plan assets it receives. Other assets which are not IRD can then be left to loved ones or other non-charitable beneficiaries

Gifts or Designation of Beneficiary of Life Insurance

What is it?

Most people buy life insurance policies to provide for loved ones in the event of their deaths, particularly where the person is the primary income earner in a family. In addition, insurance is often used to address a particular liquidity need, such as to provide funds for a specific purpose such as the education of children, money to pay taxes upon death, etc. However, as a person’s financial circumstances change, they may find less need to maintain life insurance into the future. For example, your assets independent of the insurance may be sufficient to accomplish your financial and estate planning goals or the purpose for which the insurance was purchased and maintained may no longer exist. In these situations, you may want to consider making a gift of all or part of your life insurance policy or the proceeds to the Sisters of St. Joseph Dear Neighbor Ministries.

How does it work?

Life insurance policies can be used to benefit Dear Neighbor Ministries in several ways:

Adding a beneficiary. You may modify your existing life insurance policy to add Dear Neighbor Ministries as the primary or joint beneficiary. Or you may name them as a contingent beneficiary. In the latter case, the charity receives the death benefits if the primary beneficiary dies before you do. By naming Dear Neighbor Ministries as a beneficiary, you can make a sizeable future gift while retaining ownership of the policy during your lifetime. In this situation, you will not be able to receive a charitable income tax deduction because you retain ownership of the policy. However, your estate should benefit from an estate tax deduction.

Giving an existing policy. If your policy has outlived its purpose, a gift of an existing policy is a great way to contribute. By donating your existing policy to Dear Neighbor Ministries, you can claim a charitable income tax deduction equal to the cost of replacing your coverage with a comparable policy and the cash value, if any.

Buying a new policy. You can establish a new life insurance policy and designate Dear Neighbor Ministries as owner and beneficiary of the policy. This is a great way to make a significant contribution and receive additional tax advantages. The premium payments are potentially deductible on your federal income tax return in each year payments are made.