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Tax Benefits of naming Signature Healthcare as your IRA Beneficiary

When retirement assets pass to heirs, the assets may be subject to both estate and income taxes which can total more than 70%. Donors can avoid these taxes by designating Signature Healthcare as the beneficiary of their retirement accounts and leaving other assets (such as appreciated stock with a stepped-up cost basis) to their heirs. Below is an example of the tax benefits of a million dollar IRA left to Signature Healthcare versus one left to heirs.

BeneficiaryHeirsSignature Healthcare
IRA Value at Death $1,000,000$1,000,000
Estate Tax (at 40%) ($400,000)0
Net After Estate Tax$600,000 $1,000,000
Income Tax (at 35%) ($210,000)0
Net Benefit of Gift $390,000* $1,000,000
*Note: Family receives 39 cents on the dollar

Signature Healthcare offers two possible solutions. First, the donor may designate Signature Healthcare to receive a portion, or all, of the IRA or qualified retirement plan assets. The donor's estate will pay no income tax on the amount left to Signature Healthcare and the estate tax liability will be reduced.

A second strategy is to name a charitable remainder trust as the beneficiary of the IRA or qualified retirement plan. The trust benefits the family for a period of time as specified in the trust instrument. No income tax will be due on the assets at the donor's death, and the estate will receive a charitable estate tax deduction for the value of the charitable gift. When the trust term expires, the remainder of the trust's assets will be used to create a permanent charitable fund for the family at Signature Healthcare.