LYME RESEARCH ALLIANCE
ESTATE PLANNING AND PLANNED GIVING
Designating an Estate Beneficiary
Naming the individuals and charities that will receive your assets once you are gone can be a simple process. Most assets can pass to your intended beneficiaries by the terms of your will. The official legal bequest language for Lyme Research Alliance is:
"I, [name], of [city, state, ZIP], give, devise and bequeath to Lyme Research Alliance, Inc., [written amount or percentage of the estate or description of property] for its unrestricted use and purpose."
Other assets, such as retirement plans, life insurance and insurance annuities, however, are not controlled by the terms of your will. These assets instead require separate beneficiary forms. The beneficiaries of the following types of asset can be easily modified at any time to meet your changing needs:
- IRAs and retirement plans
- Life insurance policies
- Insurance annuities
IRA and Retirement Plan Beneficiaries
Most retirement plans, including 401(k)s and IRAs, are income tax–deferred, meaning that income tax is not paid until the funds are distributed to you in life, or upon your death. This taxation makes retirement assets among the most costly assets to distribute to loved ones. Because they are subject to income taxes to your beneficiaries, retirement assets make ideal gifts to tax-exempt charitable organizations such as Lyme Research Alliance. Otherwise, the income taxes on retirement assets you leave to your loved ones can be as high as 39.6 percent. This means that an IRA worth $100,000 will be worth only $60,400 by the time it reaches them. On the other hand, the naming of a charity as the beneficiary of retirement assets upon death generates no income taxes. The charity is tax-exempt and eligible to receive the full amount and bypass any income taxes. This means that in the above example, the LRA would receive the full $100,000 benefit.
Life Insurance Plan Beneficiaries
Life insurance is a popular method of providing much-needed funds to a beneficiary at your death. Life insurance proceeds are almost always income tax–free to the beneficiary. The beneficiary designation in your life insurance policy determines where the proceeds will be distributed. The death proceeds, therefore, are not typically transferred through your will. Life insurance can be distributed to a charitable organization such as the Lyme Research Alliance, if we are named as a beneficiary of the policy at the time of your death.
Contact your insurance company for its change of beneficiary form for the life insurance policy. If you would like to name the LRA as a beneficiary, simply decide what percentage of the policy's value (0–100 percent) you would like us to receive and name us, along with the stated percentage, on the beneficiary form. Then return the form to your insurance company.
Insurance Annuity Beneficiaries
Insurance annuities, unlike life insurance, carry an income tax burden. Your named beneficiary is responsible for paying the income tax due on the growth of the annuity while you owned it. The tax burden makes these assets a popular choice to leave to a charitable organization like the LRA because we, as the recipient, can eliminate the tax bill.
Contact your insurance company for its change of beneficiary form for the insurance annuity. If you would like to name the LRA as a beneficiary, simply decide what percentage of the policy's value (0–100 percent) you would like us to receive and name us, along with the stated percentage, on the beneficiary form. Then return the form to your insurance company.
For More Information
Please consult an estate planning attorney before finalizing changes to your estate plan. We can also help you learn more about customizing a gift that will make a lasting impact at Lyme Research Alliance.