Under current tax law, the recipient generally must report distributions from qualified retirement plans, such as IRAs, Keoghs, qualified pension or profit-sharing plans, tax-deferred annuities, and some TIAA-CREF plans, as taxable income.
In addition, distributions from these retirement plans to designated beneficiaries of the account-holder can be subject to estate taxes. In a large estate, these income and estate taxes can leave less than 30 cents on the dollar of the plan’s balance for your heirs (excluding your spouse).
By naming Harvard Law School as the beneficiary of the remainder of your retirement plan, 100 percent of the plan’s balance would be available for the Law School’s use because the distribution would avoid both income and estate taxes.
To make this gift, you can simply notify your plan’s administrator of your wish to change the beneficiary. A “change of beneficiary” form will be required. Should you designate that your qualified retirement plan come directly to Harvard Law School, your spouse will need to consent in writing to the designation. A consent is not necessary for an IRA unless you reside in a community property state.
If your spouse and children are currently the beneficiaries of your retirement plan, you can continue to keep them as beneficiaries, and also include Harvard Law School as the beneficiary of a portion of the plan. When distributions are made, the plan administrator can “cash out” the Law School’s share of the account without affecting your family’s portion of the account, so that Harvard, and your heirs, benefit from your retirement savings.
Sample Beneficiary Designation Language
Sample Beneficiary Designation for a spouse and Harvard Law School
The beneficiary is my spouse as long as he/she survives me. The beneficiary of any amount(s) remaining in the plan after the death of my spouse, or of the entire amount in the plan upon my death if my spouse does not survive me, or of any portion thereof which my spouse may disclaim, is The President and Fellows of Harvard College, for the benefit of Harvard Law School.