Let’s face it. many people HATE paying tax. And many people hate paying income tax when distributions are made from their IRA.
We recently were working with a gentleman from our area on his estate plan. He owned property in Dane County. He had never been married and he never had children.
He wanted to leave some things and some money to a family member of his, but he liked the idea of setting up some scholarship funds. So, after quite a bit of discussion, he decided to name his college as the beneficiary of part of his IRA when he died. But he did not want the funds from his IRA to go into the general funds of the college. So, we are restricting the IRA so that it can only be used in a certain curriculum of the university. Now, he knows that students in his prior field will benefit from scholarships that he establishes.
He also knows that none of his IRA will go the federal government or the State of Wisconsin (or any other state for that matter). By naming his college as the beneficiary of his IRA, even if the money can be used for certain restricted purposes, the distributions after his death to the college will go income-tax free.
If you are leaving some assets to individuals when you die, and other assets to charities or educational institutions, you may want to consider leaving all or part of your IRA to the charities. Charities don’t pay income tax when they are the beneficiary of an IRA. Leave your non-IRA assets to individuals – there will be no income tax consequence to those individuals.
The estate lawyers of Krause Donovan Estate Law Partners, LLC practice law in the areas of Probate, Wills, Estate Planning, and Trusts. We assist clients in and around Madison, Wisconsin with all matters related to estate planning, trusts, and probate matters. Our dedicated attorneys will even make house calls if you are unable to come to our office.
Contact our office by calling (608) 268-5751 to schedule a consultation or use our online contact form.