Think Twice Before Leaving Retirement Plan Assets to Heirs

Judy Gruber, '63, is well aware what can happen when you are the beneficiary of a retirement plan. After federal estate tax, state and federal income tax, and possibly the generation-skipping transfer tax, heirs can end up with less than one-third of their loved one's retirement savings account. gruber3001

"I was a beneficiary of my brother's retirement plan," says Gruber. She was shocked when she realized how much of his untaxed retirement assets went to the government. "My brother worked too hard to have a lot of that money gobbled up in taxes."

Because retirement plans are typically large, many people mistakenly think that they are generous assets to pass down to heirs. But leaving these holdings, which have never been taxed, to heirs is not the most tax-advantaged manner to remember loved ones. A better option is leaving other assets such as stocks, bonds, or property that are not subject to double or triple the taxation.

Gruber started working with her attorney on her own estate plan when she was in her 50s. "I needed to be responsible for what has come to me and what I leave behind," states Gruber, adding that she reviews her will about every five years. "Estate plans need stewardship. They also need to be set up by attorneys or financial planners who are experts in the field of estate planning."

Since retirement plan assets can be given tax-free to charitable organizations, she decided to divide her retirement plan assets among her favorite nonprofits, including Ball State. She established the Judith G. Gruber Fund, which will benefit Ball State's Teachers College.

"There's so much growth at Ball State. I wanted to be a part of it, too," said Gruber.

Learn more about gifts of retirement assets to Ball State.